According to Sovereign Man, JP Morgan’s private banking division in Singapore is going to start charging negative interest rates. A successful hedge fund manager and one of their best customers stated that he had received a notice, then immediately called up his private banker and demanded to know why.
“We can’t make money anymore…” was the response, because of the cost of compliance demanded by the US (personally, I tend to think that JP Morgan wants to make free money by holding your assets, and they are scapegoating to an extent… but this does not diminish the costs imposed on foreign banks by the US government).
What the United States is doing right now is demanding foreign banks follow US-mandated compliance and regulations. All over the world, bankers are contacting their customers and forcing them to fill out paperwork to comply with US government regulations. Even when there’s no connection to the US.
All of this is happening because the US government is bankrupt. A few years ago they passed the Foreign Account Tax Compliance Act (FATCA); FATCA is now in force and banks all over the world have been forced to enter into information sharing agreements with the IRS, meaning that they have to report on all of their customers and force them to fill out meaningless forms.
The US government tells us that all of these disclosure programs have brought in about $6.5 billion in tax revenue (food for thought: the US taxes its citizens even if their income is earned abroad), yet the costs of compliance are estimated to cost at least $8 billion, with some estimates over 10x higher.
‘Uncle Sam’ gets the money and passes on the much larger costs to everyone else… and those who don’t comply with America’s rules are destroyed.
An example of this happened last year, when a French bank was fined $9 billion for doing business with countries that the US didn’t like.
A French bank, not an American bank. They violated no French laws, yet they had to pay the US government $9 billion for doing business with places like Cuba.
(Ironically, Cuba is now great buddies with the United States. So basically, doing business in Cuba is not illegal because it is evil, but because the US says so.)
More recently, the US government destroyed an Andorran bank that was accused of weak anti-money laundering controls, and a few years ago they took down the oldest private bank in Switzerland.
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Who enforces the fines? What’s the US’s leverage that a foreign bank would prefer to pay a fine than just disregard it?
Yeah good point Jess. If these rules are just ignored they’re meaningless. We should all ignore unjust laws.