Last week, the IRS asked U.S. District Judge Alan S. Gold to enforce "John Doe summonses" on 52,000 Swiss bank accounts holding almost $15 billion in assets. This action demonstrates the folly behind using privacy and secrecy as the basis for asset protection or tax planning. History has shown than any strategy that is based on privacy or secrecy is destined for failure. Right or wrong, in our current global economy the nations of the world - and the financial institutions of those nations - provide the U.S. government with tremendous political power and financial influence in shaping privacy policies and standards throughout the world.
I don't know how many times we have seen this sort of thing. Years ago, it was the Cayman Islands, and the Isle of Man. Before that, Panama. Remember the crackdown on anonymous Visa debit cards? A lot of people paid a lot of fines and served a lot prison time over those privacy scams. Eventually, this Swiss banking fiasco will produce the same results. It is just a matter of time.
It reminds me of tonight's episode of "24", where the bad guy had a surgically implanted chip containing the list of all the government conspirators and bad-guy financial records. Jack Bauer had to literally carve it out of him. The data was very private, but it wasn't very accessible - at least not without considerable blood and pain. (I asked my wife how the bad guy was supposed to keep the files on the chip updated. She laughed at me because I always over-think things.)
But the point is that relying on privacy is a losing proposition. Laws and loopholes that allow for privacy benefits not only can be changed - they probably will be changed. It is only a matter of time. And, when that time comes, things will get ugly for everyone with their name on that list. And, like the data chip implanted in the bad guy, relying on privacy makes it impractical - if no impossible - to actually have use of the hidden assets.
Plan your asset protection and/or tax strategy as though the day will come that you will have to lay all your cards on the table. That way, at least you'll be able to sleep at night - which may be more than 52,000 Swiss bank account holders are doing these days.
