(Reuters) – Switzerland, despite bank settlements with the United States to disclose tax evaders, remains the top refuge for financial secrecy, according to a new international ranking of tax haven countries.
Switzerland is the world leader in financial opacity, only grudgingly conforming with disclosure agreements among developed countries while courting tax evaders in developing nations, said a report released on Monday by the nonprofit, nonpartisan Tax Justice Network.
Steeped in a long tradition of bank secrecy, Switzerland has recently signed information sharing agreements as part of a reporting program with the Organization for Economic Co-operation and Development. But these efforts have been "ineffective," the report said.
Switzerland's "widespread involvement in the administration and use of trusts, foundations and offshore companies remain a major barrier to tackling tax evasion and illicit financial flows," the report said.
Officials at the Swiss embassy in Washington were not immediately available for comment.
U.S. authorities continue to pursue Swiss banks for information about U.S. clients' assets. Credit Suisse Group AG (CSGN.VX) said this summer it is under a grand jury investigation.
UBS AG (UBS.N) (UBSN.VX) in 2009 paid $780 million to settle a Justice Department investigation.
The United States ranked fifth, behind Switzerland, the Cayman Islands, Luxembourg and Hong Kong among the most secretive nations, according to the report.
U.S. law allows foreigners to earn income from property that can be kept secret from the tax and criminal authorities in their home countries, the report found.
"Financial secrecy provided by the U.S. has caused untold damage to the ordinary citizens of foreign countries, whose elites have used the U.S. as a bolt-hole for looted wealth," the report said.
The United States ranked first among tax havens in the advocacy group's last report from 2009. The methodology was changed this year to account for how egregious a country's secrecy is considered, with less emphasis on the size of its economy.
U.S. tax evaders "rob the Treasury and force average taxpayers and small businesses to pick up the tab," Nicole Tichon, executive director of the Tax Justice Network, said in a statement. Legal reforms in the Dodd-Frank financial reform law plus the Foreign Account Tax Compliance Act have cracked down on tax evasion, but the U.S. needs to do more, she said.
The U.S. loses about $100 billion a year in taxes lost to assets held in offshore jurisdictions, Tichon said, citing a Senate investigation.
U.S. Treasury officials were not immediately available for comment.
The report highlighted concerns with UK jurisdictions.
The English Channel islands of Jersey and Guernsey, which are Crown Dependency jurisdictions and ranked seventh and 21st respectively, have become bastions for financial secrecy.
In all, 10 secrecy jurisdictions on the list are either British Crown Dependencies or British Overseas Territories, like the Cayman Islands and Bermuda, which ranked second and 12th, respectively.
The British network of tax havens has been "among the most important reasons for the reach and power of the City of London," the report said.
(Reporting by Patrick Temple-West, editing by Kevin Drawbaugh)
WASHINGTON – Mortgage giant Fannie Mae knew about allegations of improper foreclosure practices by law firms in 2003 but did not act to stop them, a government watchdog says.
Similar allegations are the subject of a probe by state attorneys general into how lenders and law firms ignored proper procedures to handle a crush of foreclosure paperwork.
An unnamed shareholder warned Fannie Mae of alleged foreclosure abuses in 2003, the inspector general for the agency that regulates Fannie says in a report being released Tuesday.
Fannie Mae responded by hiring a law firm to investigate the claims in 2005. The law firm reported in 2006 that it had found foreclosure attorneys in Florida "routinely filing false pleadings and affidavits."
Fannie officials said they told a government official about the law firm's findings in 2006. That unnamed official, who now works for Fannie's regulator, the Federal Housing Finance Agency, said he couldn't recall the conversation, the report says.
Fannie began using a network of attorneys in 1997 to help handle foreclosures, evictions and bankruptcies. In 2008, the network grew to 140 law firms. And the number of foreclosures in Fannie's portfolio reached historic highs. Foreclosures more than doubled from 2007 to 2008. They grew 50 percent in 2009.
In June 2010, FHFA officials went to Florida to study the foreclosure crisis. They found that the mortgage industry was overwhelmed by foreclosures; that the average foreclosure processing time had grown from 150 days to more than 400 days; that lenders were beset by flawed documentation; and that law firms weren't devoting enough time to cases.
The worst practices, known collectively as "robo-signing," led some lenders to suspend foreclosures last fall. And it led to an ongoing investigation by all 50 state attorneys general.
Several states, including California, Delaware and New York, oppose a proposed settlement with the lenders. They complain that the lenders would receive unfair immunity from civil litigation under the deal.
Fannie and its sister company, Freddie Mac, own or guarantee about half of U.S. mortgages. That equals nearly 31 million loans worth more than $5 trillion. And they account for nearly all new mortgages.
The Bush administration seized control of the mortgage giants in September 2008, hoping to stabilize the housing industry.
The inspector general's report says FHFA plans to change its oversight policies by the end of 2012. The report is among several government inquiries into the aftermath of the housing crisis.
A broader report into missteps by Fannie and Freddie is expected this fall.
ANCHORAGE, Alaska – A lawsuit that stands in the way of Shell Oil's plans for exploratory drilling in the Chukchi Sea off Alaska's northwest coast is back in the hands of a federal judge.
The Bureau of Ocean Energy Management on Monday delivered its formal response to a court-ordered review of environmental work preceding Chukchi Lease Sale 193. Shell Gulf of Mexico Inc. had spent $2.1 billion for the leases in 2008.
Alaska Native and environmental groups sued over the legitimacy of the sale, contending that the bureau's predecessor, the Minerals Management Service, had ignored environmental law requirements before selling petroleum rights on 2.76 million offshore acres.
The bureau in August said it had corrected environmental review flaws. The public had until Sept. 26 to comment on the agency's supplemental environmental work.
Erik Grafe, an attorney for Earthjustice, which represented the 15 plaintiffs in the case, said the agency acknowledged it was missing information on how drilling will affect whales, polar bears, walrus, fish and other Arctic marine species, yet dismissed the importance of such information.
"It basically amounts to a conclusion that nothing is essential," he said.
U.S. District Court Judge Ralph Beistline of Anchorage will review the agency's submission. If Beistline rules against the environmental groups, they can appeal, Grafe said.
Shell Alaska spokesman Curtis Smith issued a statement that said the decision clears the way for BOEM to conclude its review of his company's Chukchi exploration plan. "We believe the Chukchi Plan we submitted in May of this year is technically and scientifically sound, and we look forward to exploring this critical part of our Alaska portfolio in 2012," he said.
The judge in July 2010 had sent the sale back to BOEM, then called the Bureau of Ocean Energy, Management, Regulation and Enforcement, for further analysis. Beistline said at the time that the agency had failed to determine whether information it acknowledged was missing before the sale was relevant or essential under environmental law, or whether the cost of obtaining that information was exorbitant.
The agency had analyzed only the development of the first field of 1 billion barrels of oil. It also acknowledged that the amount was the minimum level of development that could occur on the leases.
The agency said that to comply with the latest court order, it had analyzed the potential effects of natural gas development, the relevance of the missing information, and the environmental impacts of a hypothetical large oil scenario.
Grafe, however, said the agency ignored conclusions reached by scientists at the U.S. Geological Survey that identified important missing information about Arctic waters. The BOEM, he said, merely lists boilerplate language with the same handful of reasons for why the missing information was not relevant.
"I think they were papering over a decision that they had already made," Grafe said. "They didn't take a serious look at what's essential."
The groups also contended there was no proven method to clean an oil spill in ice-choked waters — especially in a location as remote as the Chukchi Sea.
Grafe said the groups have until mid-November to file briefs arguing that the sale remains illegal. Briefs in response would be due Dec. 21.