Whistle Blower Changes Swiss Bank

Business and Professional Ethics

10 December 2018

Whistle-Blower Changes Swiss Banking

Legal Quandaries Faced by Bradley Birkenfield as a Whistle-Blower

        Bradley Birkenfield approached the authorities in United States with solid evidence of UBS bank's shady dealings with renowned businessmen around the world to help them avoid the IRS. Although he presented himself as a whistle-blower, Birkenfield ended up being treated like one of the culprits in the whole scandal for the role he had played in the scheme. It turned out that he had legal questions of his own that the authorities needed answering. The matter was compounded by the fact that Bradley was not as innocent himself when he was reporting his bank for malpractices. It is his previous dealings in the past that came back to haunt him and turned him from a whistle-blower to a convict for his role in aiding a Californian real estate mogul evade taxes. In exposing his bosses at UBS, Bradley Birkenfield was also digging a hole for himself by virtue of being an accomplice in the tax evasion ring that he wanted to bring down (Kohn).

        The malpractice that he wanted to report as a whistle-blower was the banks help extended towards global business moguls where their money got moved around to avoid the nostrils of the IRS thus leading the federal agency with loss in revenue as a result of the evasive tactics. Birkenfileld was also a part of this banking ring that conducted this practice because he helped Russian-born Californian-based real estate business mogul Igor Olenicoff to move massive amounts of money without paying tax. By the time of his coming forward, the whistle-blower had helped Olenicoff to move over $200 million which helped the realtor evade over $7.3 in tax payables. Prior to this, the whistle-blower had confessed to dealing in blood diamonds that he had to smuggle across to the United States concealed as toothpaste. This complicated history with the law made him a wanted man in the first place before he could be guaranteed rights as a whistle-blower.

        As a wanted man and subsequent convict, being on the wrong side of the law preempted any rights that Mr. Birkenfield could have been accorded by virtue of being a whistle-blower. He was later released in 2012 where he was presented with $104 million as a restitution for the role he played in helping the IRS to recover billions of dollars in tax evaded (Birkenfield).

How Switzerland’s Banking Laws and Its Position as a Tax Haven Were Affected by the Whistle-Blower’s Actions

        The course of action taken by Bradley Birkenfield was bound to affect the banking laws of Switzerland as well as rattle the country's global position as a tax haven. The matter got even complicated when the IRS made substantial attempts to stop its citizens from using UBS accounts to conceal their assets. The demand by the United States tax authority to have UBS compelled to forward a list of 52,000 citizens with offshore accounts in Switzerland is seen as a game changer in the country's secretive banking laws. The envisaged banking reforms were necessitated by the UBS scandal that involved the avoidance of tax by American individuals. The Swiss authorities were forced to take swift action in implementing the reforms to salvage its national pride as a tax haven where investors all over the world could flock and safeguard their funds (Birkenfield).

        The UBS scandal forced the country's banking sector to make substantial changes to its banking laws and financial regulations. The first point of reform was to revise the banking regulations to ensure the financial system remained stable. This was in line with other international banking players as a desired international standard. The reforms were also geared towards aligning the Swiss banking laws to those of the rest of Europe to ensure equivalence in the access to the international markets. There was a greater desire to ensure that these reforms did not just constitute a patchwork of regulations but they encompassed a broader regulatory framework for Swiss banks. Banking experts and economic observers concur that the banking environment after the UBS whistle-blowing scandal was characterized by plenty of legal developments and loopholes that needed to be addressed, especially regarding international tax issues.        

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