Beating the Shell Game: Bank Secrecy Laws and Their Impact on Civil Recovery in International Fraud Actions
| Date | 01 January 1997 |
| Published date | 01 January 1997 |
| DOI | https://doi.org/10.1108/eb027119 |
| Pages | 42-51 |
| Author | George J. Moscarino,Michael R. Shumaker |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control 1/1
Beating the Shell Game: Bank Secrecy Laws and
Their Impact on Civil Recovery in International
Fraud Actions
George J. Moscarino and Michael R. Shumaker
'Any German national who, deliberately or
otherwise, activated by a base selfishness or any
other vile motive, has amassed his wealth abroad
or left capital outside the country, shall be
punished by
death.'1
This decree by the Nazi Government in 1933 is
probably the single most important event leading
to the advent of bank secrecy laws as we know
them today. This criminal provision was enacted to
halt the German Jews' movement of assets out of
Germany and into Swiss banks — a movement
that was occasioned by the Government's attempt
to seize the Jews' assets.2 Swiss banks were chosen
because of their geographic proximity, but more so
because of Switzerland's then unofficial policy of
confidentiality over banking deposits and trans-
actions.
One year after the law's enactment, three
German Jews were executed.3 These executions, as
well as the pressuring of Swiss Bank employees for
information by German gestapo agents, prompted
the Swiss Government to codify its practice of
maintaining the confidentiality of its customers'
accounts.4 This law provided for the assessment of
both civil and criminal penalties against any vio-
lator.5 Thus was born the first effective bank
secrecy statute.
The passage of this secrecy law proved finan-
cially profitable for Switzerland.6 This success did
not go unnoticed. Other European nations, such as
Luxembourg and Liechtenstein, adopted similar
bank secrecy laws not long after the Swiss. Based
on their successes, a number of island countries
located in the Caribbean and West Pacific seas
adopted even more stringent bank secrecy laws
with similar hopes of attracting foreign banking
activity.
Without question these banking laws have
worked in attracting substantial amounts of funds
to these bank secrecy jurisdictions.7 Unfortunately,
the financial advantages that these laws offer their
countries, offer even greater financial advantage to
the sophisticated criminals that now use those jur-
isdictions to hide or obscure their illegal and ill-
gotten gains.
The government officials in these bank secrecy
jurisdictions have, for the most part, come to
accept the fact that their laws have been manipu-
lated by criminals in furtherance of their illegal
deeds,
and have taken cooperative steps with their
international partners to terminate this abuse. For
example, the USA has entered into over 20 mutual
legal assistance treaties with foreign nations8 to aid
both parties to the treaties in the criminal prosecu-
tion of money laundering, as well as the under-
lying crime whose fruits are being laundered. In
addition, numerous international directives, con-
ventions and agreements have been entered into by
a number of the world's nations, all of which are
designed to assist one another in the prosecution
of criminal offences and, in many cases, the use of
the various bank secrecy laws to hide illicit funds.
These international agreements and treaties
ignore, however, the civil side of the equation.
Individuals and corporations that are victimised by
the sophisticated white-collar criminals that are so
prevalent today will certainly applaud any prose-
cutor that brings the individual or association that
committed the crime to justice. But, if the indivi-
dual or corporation has been victimised to the tune
of several millions of dollars and the criminal's
sentence is limited to prison time and a $500,000
fine, their applause may quickly subside.
For these individuals, the chief avenue of recov-
ery is a civil action. To succeed in a civil action,
you must be able to prove your case. The bank
secrecy laws in these foreign jurisdictions, how-
ever, often prohibit civil plaintiffs from learning
the facts that are necessary to meet this burden.
This paper briefly discusses the tools that are
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