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BEHIND THE HEADLINES: US continues money hunt

Tony Best

BEHIND THE HEADLINES: US continues money hunt

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Credit who?
Up until late last year when Chris Sinckler, Barbados’ Minister of Finance, told Parliament that the Government had secured access to a US$225 million bridging loan from Credit Suisse, most Bajans had never heard of it.
“What this will do for us is to allow the Government to satisfy the remaining financial requirements for the rest of the financial year [ending March 31, 2014],” said Sinckler about the loan.
“It will give a boost to the [foreign] reserves, initially to be about $300 million, which would bring us up to anywhere to about $1.2 to $1.4 billion and that would represent between 13 to 14 weeks import cover,” he went on.
But those words, obviously meant to reassure a bewildered public, were met with a strong dose of skepticism from Mia Mottley, the Opposition Leader, who warned about the “unchartered waters” into which Barbados was entering after it became clear that the conditions for the loan would include a financial penalty should Wall Street downgrade Barbados credit rating once again and that the island-nation must provide Credit Suisse with a full copy of the International Monetary Fund’s staff report issued after an Article 1V consultation.
“When a sovereign government must now report on the execution of its policy to a mere commercial bank for a mess of pottage without which we would be in serious trouble” it would be clear that Barbados was in trouble.
However, this much is clear: Bajans will be hearing much more about Credit Suisse, not simply because of the loan but because the highly respected bank is under criminal investigation by United States (US) authorities for its dealings with Americans who are evading taxes. That heat will have serious implications for Barbados’ offshore financial services sector, private firms and individuals.
True, the Senate’s concerns about Credit Suisse don’t directly involve Barbados. Also true: the bank which has operations around the world, the Cayman Islands included, is stoutly defending itself against what its chief executive Brady Dougan called “scattered evidence” of wrongdoing of which its top managers were unaware.
But to the US Senate permanent sub-committee on investigation, the bank’s rebuttal sounds more like a case of don’t blame me – it was the dog that ate the lunch.
For as the Senate panel sees it, Credit Suisse, which once had nearly 2 000 bankers assigned to 22 000 accounts held by Americans and their US$13 billion in investments, some of which were in shell companies in offshore centres, was a willing participant in tax evasion. Of course, Credit Suisse must be considered innocent until proven guilty in a court of law.
“Financial institutions like Credit Suisse have profited from their offshore tax haven schemes while depriving the US economy of billions of dollars in tax revenues,” charged Senator John McCain of Arizona and the subcommittee’s top Republican. “As federal regulators begin to crack down on these bank’s illicit practices, it is imperative that they use every legal tool at their disposal to hold these banks accountable.”
And that’s where Barbados will come in. Although the Caribbean country isn’t in the league of say London, Miami, New York and the Cayman Islands when it comes to financial wheeling and dealing, the Senate subcommittee is aiming some of its fire-power at the Caribbean as well, demanding that the US Justice Department headed by Eric Holder, the son of Barbadian parents, should stop dragging its feet when it comes to offshore financial activities by a host of banks and other financial institutions that do business with Americans.
“It is time to ramp up the collection of taxes due from tax evaders on the billions of dollars hidden offshore,” insisted Democratic Senator Carl Levin of Michigan, the subcommittee’s chairman.
Just last year, the US Internal Revenue Service served a “John Doe” summons on Wells Fargo Bank demanding that it hand over any documents that would identify US taxpayers with accounts at the Barbados-headquartered FirstCaribbean International Bank (FCIB). Wells Fargo provides corresponding banking services to FCIB, and the IRS wants to find out if it was an unwitting conduit for the transfer of funds to or from the US and the 18 Caribbean countries in which FirstCaribbean operates.
That’s part of what Senator Levin and the panel are talking about. For Credit Suisse and 11 other Swiss banks are being investigated for allegedly facilitating tax evasion by Americans. The Swiss bank may soon settle its case and pay upwards of US$700 million in fines to the US.
Any heightened pressure on Credit Suisse and other European banks to curb tax evasion can have an adverse impact on Bajan firms and individuals. Full disclosure of bank accounts and financial transactions can add to the cost of doing business in Barbados and America.