Turkey to Seek Information From Switzerland

The Turkish government is preparing to request information about Swiss bank accounts held by Turks. It seems Turkey has analyzed the agreement between the US and UBS and concluded that this constitutes a precedent Turkey can take advantage of to request information about bank accounts of its nationals. It is believed that in excess of $60 billion might be on Swiss bank accounts.

However, this might be running into difficulties as there is currently no information exchange agreement between the Switzerland and Turkey.

If I am not mistaken than the convention has been signed by both countries but is currently pending approval (French) in the Swiss Parliament. The text can be found here (French, German both pdf)

[Source: Hürriyet]


World Stocks Controlled by a Handful of Investors?

A recent study made by researchers from the Swiss Federal Institute at Zurich (Eidgenössische Technische Hochschule Zürich, ETHZ) thinks as much. J.B Glattfelder and S. Battison from the Chair of Systems Design write:

The Flow of Control

The Flow of Control

The full work can be downloaded here (pdf).

This reminds me of the following I once read:

‘More than 90 percent of the proteins in the network had five or fewer links, and only about one in five of these was essential to the yeast’s continued survival. With these removed, the yeast could still function by adapting its remaining network. In contrast, less than 0.7 percent of the proteins were hubs having more than fifteen links.’
From: Nexus by Marc Buchanan 2002

It seems that this is a pattern found all throughout nature and it is might thus not be surprising that we’ll find it in economics as well.
On second thought, however, it is surprising, because yeast and other such phenomena are natural occurences based on laws of a nature that cannot be changed, whereas the economy (especially finance) is not a natural phenomenon, but is entirely man-made with laws that can be changed.

Considering all the efforts made to create and maintain a more equitable society, I find this result still a bit surprising.
It seems to me that the old feudal structures we – well, not all but certainly the overwhelming majority of mankind – wanted to ged rid of are still here.

Hat tip Naked Capitalism

Burma, OFAC and International Payments

Tages Anzeiger is on to something here.

In a first article (German) the newspaper writes about a Swiss citizen, Ms Zumsteg (not real name), who wanted to help her tourguide she met during a trip to Burma (Myanmar) in 2006.

The two have staid in contact ever since. Recently her Burmese tour guide had gotten into financial difficutlies. Because of the econmic crisis tourists staid away. Being asked if she would consider coming to Burma for another trip Ms Zumsteg declined due to lack of time but decided to help out by sending $500.
However, Burma due to international sanctions is not rechable via direct ransfer, so the two agreed to send the money to a cousin of the tourguide who lives in Singapore.
She asked her Bank, the Bank Raiffeisen, to execute the transfer. The bank recommended to name the Burmese tour guide as the “beneficiary” in the payment. His name is Han Soe Win, by the way.

Shortly thereafter trouble ensued. Raiffeisen called Ms Zumsteg raising hell accuesing her of “having supported a terrorist” and demanded to receive a photograph and copy of the passport of Han Soe Win. Raiffeisen claimed if they didn’t receive the information from her until 4pm that day, they would “lose their licence in the US”. They even threatened Ms Zumsteg to sue her for all the damages connected to that event. Raiffeisen also claimed that the “US had confiscated the $500.”

Now, Han Soe Win is a very common name in Burma, unfortunately it is also a name that appears for some reason on an US terror list.
Fortunately for the persons involved the issue was resolved within a few days. According to Raiffeisen it was “a missunderstanding”. The bank said that “names in transfers” were checked routinely against “lists of terror suspects”. The partner bank in Singapore had raised the issue and that this had to be resolved according to Raiffeisen.

Well, that may be, but that doesn’t explain the threats and claims made by Raiffeisen. As Raiffeisen does not have a bank licence in the US, how could it be in danger of losing that licences? How would the US find out about this payment anyway, as it was effected between Switzerland and Singapore as far as I know this doesn’t pass via the US. How then would the US know about such a transfer let alone be able to block or even confiscate the money so transfered? Was this all just false claims made by Raiffeisen, or is there something real behind those claims?

In a second article by Tages Anzeiger (German), some of the questions may have been answered. Obviously the mentioning of the term “Burma” in any context triggers something somewhere between one bank and the other.

Ms Schulthess ordered “Walnut Parquet” in China. Unluckily for her the wood used for manufacturing the parquet was called “Burma Walnut”, which btw is a commonly used term in this business. Also the wood is not from Burma but comes from the southern part of China.

However, these details are obviously lost on some people. While the first part of the payment went through, the second installment didn’t make it. After some investigation by Ms Schulthess, Swift, which executes those payments, said that the payment had been blocked for possible breach of the embargo against Burma. Swift claimed that this may be a case for the Office of Foreign Assets Control (OFAC) to get involved.
As it turned out later, the payment had been not been blocked by US authorities but by Citibank,  the correspondence bank for this payment. Citi had found the word “Burma” to be suspicious and had blocked the payment.

The Zurich Cantonal Bank (Zürcher Kantonalbank or ZKB), Ms Schulhess’ bank, explained this the following way:

All international payments are automatically sent through a so-called sanction filter. This filter contains all UN and some country specific sanctions. In this case the payment was routed through the US that is why the US sanctions against Burma were applied.

This sounds plausible. However, I wonder why this payment went through Citi and the US instead of going directly to China.

I conclude that under no circumstances should you use the word “Burma” – and certainly some other words – in any of your payments when not absolutely necessary.
How dumb do they think terrorists are anyway. I am sure not many of them would mention OBL as beneficiary of their payments, but that’s just a guess.

Also don’t assume that just because the US is not a party in a payment that the payment isn’t routed via the US.  Certainly it is worthwile to know more about the ownership of these physical networks through which the payments pass, and about the service provider(s) that deliver the payment services on these networks.
Might it be that the DTCC is involved here in some way? Maybe much more traffic is routed through the US than most of us think. Probably not just for efficiency, but that’s just a guess too.

Three Law Professors Speak Out Against the UBS Deal

In a letter to IRS Commissioner Doug Shulman three law professors from American University’s law school have expressed their concern about the deal in the following words (hat tip tax.com and a reader, emphasis mine):

August 19, 2009Hon. Douglas Shulman
Commissioner, Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Dear Commissioner Shulman:

We have been following the news reports of the IRS’ very commendable efforts to challenge US tax evasion protectively cloaked by Swiss bank secrecy laws. The latest US-Swiss declaration of August 19, 2009 represents the fruit of those efforts and will result in the IRS receiving information about several thousand US taxpayers with Swiss accounts. The agreement provides that UBS will first notify account holders that their names are to be shared with IRS and to afford those account holders a chance to dispute the disclosure under Swiss law.

We have also watched with interest the IRS’ efforts to promote voluntary disclosure by US taxpayers prior to IRS’ commencement of examination. With the lure of amnesty in the form of no criminal action and reduced civil penalties, the IRS hopes taxpayers will come forward “voluntarily.” This general concept is equally laudable. However, the IRS’ promise to keep open the September 23 amnesty deadline for taxpayers who come forward even after they receive notice from UBS that their names are about to be revealed is the point at which we depart company with IRS policy.

It seems that when a taxpayer is told he is about to be “given up”, the leniency of the amnesty is no longer warranted. The self-identification is no longer “voluntary.” Ordinarily, a taxpayer who accepts an amnesty offer gives up the chance, however slim, of being overlooked; the government is spared the effort to ferret him or her out; and the reward of lesser sanctions has some cogency. Here, though, the taxpayer is specifically identified, forgoes no chance of staying under the radar, and spares the government nothing. Admittedly, the window of time for all of this is short, but the principle of amnesty for less-than-really-voluntary disclosure seems unduly generous.

Our law school operates a low income taxpayer clinic. In the last few years, we have seen an increase in the assertion of penalties against the poorest, least sophisticated taxpayers with virtually negligible room for negotiation by the IRS. It would seem that a blanket program of offering reduced penalties and no criminal action to wealthy, sophisticated tax dodgers who come forward on the eve of their names being turned over to the IRS and with prior knowledge of the forthcoming disclosure, is suggestive of something less than even handed tax administration.

Very Truly Yours,

Nancy S. Abramowitz
Andrew Pike
Robin Westbrook
Profs., Washington College of Law
American University

I can only agree with that. It is not long ago the Supreme Court of the United States wrote in Boumedienne v. Bush (emphasis mine):

(iii) The Government’s sovereignty-based test raises troubling separation-of-powers concerns, which are illustrated by Guantanamo’s political history. Although the United States has maintained complete and uninterrupted control of Guantanamo for over 100 years, the Government’s view is that the Constitution has no effect there, at least as to noncitizens, because the United States disclaimed formal sovereignty in its 1903 lease with Cuba. The Nation’s basic charter cannot be contracted away like this. The Constitution grants Congress and the President the power to acquire, dispose of, and govern territory, not the power to decide when and where its terms apply. To hold that the political branches may switch the Constitution on or off at will would lead to a regime in which they, not this Court, say “what the law is.” Marbury v. Madison, 1 Cranch 137, 177. These concerns have particular bearing upon the Suspension Clause question here, for the habeas writ is itself an indispensable mechanism for monitoring the separation of powers. Pp. 34–36.

The same problem does exist here as well.  How can the protections granted in the Constitution just be turned on and off at will by the governement purporting that there is an international issue (or a conflict of two jurisdictions in this case) that required an international contract which does away with the rights granted in the Constitutions? Methinks it cannot be at all!

Gentlemen, the nation’s basic charter cannot be contracted away like this. Me shudders if this should become the norm.

Illinois Homeowner Files Class Action Suit Against JP Morgan Chase

From HousingWire.com:

A new form of lawsuit against mortgage lenders is evolving amid the tight credit environment. Rather than alleging lenders made misleading or predatory loans, consumers are now filing suit over lenders refusing to extend credit.

A Zion, Ill. homeowner, Pascal Majon, is suing JP Morgan Chase (JPM: 43.66 +2.92%) over alleged fraud to deny homeowners access to funds through their previously approved home equity lines of credit (HELOCs).

The servicing rights of Majon’s mortgage, originated by Washington Mutual Bank, transferred to Chase after it bought WaMu’s banking subsidiaries. Chase then froze Majon’s home equity line of credit, citing a decline in the value of his home.

“In reality, Majon’s home did not decline in value,” according to a press statement out of KamberEdelson, the law firm representing Majon.

The key point of the complaint are that credit was reduced in an illegal, fraudulent and unfair way because WaMU (later JP Morgan Chase) reduced or canceled credit lines without giving appropriate reasons, claimed a factual basis for reductions when indeed there was none.

Especially interesting is the TARP dimension mentioned in points 8 to 10 ın the complaint.

Mueller Takes It Personal

Current FBI director Robert S. Mueller III has sent a letter to Scotish Justice Minister, Kenny MacAskill expressing his dismay about the release of convicted Lockerbie bomber Abdel Basset al-Megrahi from a Scottish prison.

Mueller complains, among other things, about (emphasis mine):

Indeed your action makes a mockery of the rule of law. Your action gives comfort to terrorists around the world who now believe that regardless of the quality of the investigation, the conviction by jury after the defendant is given all due process, and sentence appropriate to the crime, the terrorist will be freed by one man’s exercise of “compassion”. Your action rewards a terrorist even though he never admitted to his role in this act of mass murder and even though neither he nor the government of Libya ever disclosed the names and roles of others who were responsible.Your action makes a mockery of the emotions, passions and pathos of all those affected by the Lockerbie tragedy: the medical personnel who first faced the horror of 270 bodies strewn in the fields around Lockerbie, and in the town of Lockerbie itself; the hundreds of volunteers who walked the fields of Lockerbie to retrieve any piece of debris related to the break-up of the plane; the hundreds of FBI agents and Scottish police who undertook an unprecedented global investigation to identify those responsible; the prosecutors who worked for years – in some cases a full career – to see justice done.

But most importantly, your action makes a mockery of the grief of the families who lost their own on December 21, 1988. You could not have spent much time with the families, certainly not as much time as others involved in the investigation and prosecution. You could not have visited the small wooden warehouse where the personal items of those who perished were gathered for identification – the single sneaker belonging to a teenager; the Syracuse sweatshirt never again to be worn by a college student returning home for the holidays; the toys in a suitcase of a businessman looking forward to spending Christmas with his wife and children.

This letter strikes me as odd.
Firstly because it was the US Government iteself who settled all terror law suits with Libya in August 2008. Mueller must know that, he was there as FBI director during that time.

Secondly, the energy used to fret about a crime that was committed more than 20 years ago – as serious and tragic as it was – could be used more effectivly by starting investigations and prosecutions of all these financial crimes committed during about the same amount of time.

Google Runs Afoul of Swiss Dataprotection Laws

In a press release on Friday the Swiss Federal Data Protection and Information Commissioner (FDPIC) has asked Google Inc. to either improve its anonymization or to remove StreetView for Switzerland from the Internet. If Google does not comply, the case will be brought to the Federal Administrative Court according to Mr. Thür.

From the FDPIC website:

Bern, 21.08.2009  – Federal Data Protection and Information Commissioner (FDPIC)  Hanspeter Thür has asked Google Inc. auf, to remove the online-service Google Street View for Switzerland from the Internet. Several Tips from the population as well as his own investigation  have revealed that Google Street View was not abiding by the conditions the FDPIC set out earlier to protect the privacy of citizens  – several faces and licencense plates were not at all or only insufficiently anonymized. FDPIC asks Google, to improve the Product and to ensure, that the published pictures are in accordance with Swiss law. Beginning of next week Mr. Thür will discuss the details and their implementation with Google Inc.

Google did take pictures in Swiss cities some months ago and finally brought the service online on August 18, 2009. Obviously, it didn’t take long for a lot of people to complain to the FDPIC. A few of the pictures can be seen on Tagesanzeiger online (where they have not been properly anonymized either).

In the meantime some companies have weighed in and complained as well, as they don’t want their office buildings or the homes of their executives to appear on Google Street View.

I wonder how hard it is to de-anonymize those pictures that have been ‘anonymized’ by Google by using the right software it might just not be that hard. This makes me thing that a little more than a simple blurring of the faces, car plates or signs is needed to really anonymize the pictures.

Careful when carrying documents

Careful when carrying documents

I also wonder if the application of face recognition software would yield good results if you were searching for certain people online.
The mechanism by which you can complain to Google makes you give away even more information about yourself. Information that may just be stored somewhere along with the original picture.

A description in English of what the FDPIC can be found on the official website.