Technology Forces Accountability | Offshore Bank Privacy Crushed

At a time when we hear much about the loss of privacy, society experiences a related trend.  This trend attracts much less attention than does the demise of privacy.

The trend is the imposition of greater accountability on responsible parties.  By "responsible parties" I mean businesses, politicians, spouses, professionals and government agencies.

Technology Makes Secrets Harder to Keep

If technology reduces privacy, then by implication "responsible parties" can keep fewer
Technology = Transparency
secrets.   If they can't keep secrets, then they are more likely to get caught if they cheat.  They are more likely to be held accountable for infidelity, embezzlement, tax evasion, environmental pollution and so on.

Swiss Bank Secrecy Demolished

Nothing is greater evidence of this accountability trend than the demolition of Swiss bank secrecy as a tool for tax evasion.

For decades Swiss bank secrecy was virtually impenetrable.  But it has been crushed by technology, in the form of whistleblowers and “big data” investigations by tax authorities.  Owing to changes in technology, the secrets of Swiss banking have leaked out to US and other tax authorities.  The authorities have used the secrets to deal lethal blows to the Swiss banking tax evasion industry.

Lawyer Forced to Snitch on Clients

The latest blow appears today’s Wall Street Journal (Aug. 17-18, 2013) in article titled “Swiss Lawyer Pleads Guilty.”  Edgar Paltzer, a lawyer licensed in both the US and Switzerland, pleaded guilty in US court to one count of conspiracy.  He agreed to cooperate with US authorities, which likely means he will snitch on his clients!*

If your lawyer is spilling the beans to the IRS, it is very hard to hide your tax evasion.

According the article, Paltzer helped American taxpayers hide foreign bank accounts.  He prepared false US tax forms for clients.

Transparency is a Modern Virtue

Technology – like the Internet, Big Data and digital forensics – motivates responsible parties to be more transparent.  If a party is more transparent, it holds fewer secrets and is less likely to be interpreted as a cheater.

--Benjamin Wright

*Treasure Trove for Tax Collectors
Normally attorney-client privilege shields from disclosure information held by an attorney.  However, attorney Paltzer is guilty of conspiracy -- presumably conspiracy with his clients to commit tax crime.  Attorney-client privilege vanishes when the attorney's services are being used commit a crime.

The implication is he is now a treasure trove of data for tax authorities.  Not only will the US government pick his brain, but it will trawl through his files, emails, computers and smartphones. Forensics can be used to recover even deleted electronic data.

Paltzer's data will be available to IRS (as well as state revenue authorities) for deeper investigation of taxpayers, foreign banks and other professionals who were tied to him and possibly facilitating tax evasion.  "Other professionals" could include lawyers, brokers, accountants, bookkeepers, wealth managers.

Paltzer's data may also be shared with non-US tax authorities, such as the Germans.