Standard Bank named "Best Expatriate Bank"

Standard Bank has been named ‘Best Expatriate Bank’ for the third time (previously titled ‘best International bank’) and for the second consecutive year also received a highly commended in the ‘Best International Structured Product’ category.

The awards are designed to reward the work of international product providers and finance centres and ‘Best Expatriate Bank’ is awarded to the bank that the judging panel believes offers the best range of current, deposit and savings products available for expatriates.

John Coyle, CEO, Standard Bank Isle of Man, said: “Receiving recognition in these highly prestigious awards is very rewarding for our Offshore group which provides services for expatriates around the world. Our Optimum current account and Quantum Plus products have been designed with expatriates in mind and offer multi-currency banking solutions. To have these products recognised as market leading and for our expatriate service to be highlighted in these awards is excellent news and we are delighted.”

He added: “These accolades are a very credible endorsement of the high standards we strive for within our business and go a long way in assisting us to raise our profile in the core markets in which we operate.”

The International Fund and Product Awards are the only awards that recognise the achievements of the offshore financial services industry and the financial products and services that they distribute through IFAs internationally. The judging panel looked for the following attributes in winners: commitment to target market; appropriateness of product range; use of technology and product innovation; and levels of service and support to distributors.

Finding private bankers is far more difficult than clients imagine

Since the financial meltdown of 2008, private bankers have been busy devising schemes to both maximize the fees they earn from wealthy clients, as well as make it more difficult for clients who wake up to discover they’ve been hosed, to fire them.

The new financial products and strategies that private bankers have been sneaking into client portfolios in recent years serve a purpose that has nothing to do with what’s best for clients. It’s all about improving the bottomline of the private banks. Unfortunately transferring wealth from client accounts is the means to the end that private banks are seeking.

Structured notes, hedge funds, hedge fund of funds and other high risk investment products lack transparency and liquidity and are hard-to-value assets. As a seasoned investigator I can assure you, it is impossible for you to evaluate and monitor the risks related to these investments. Don’t even try to.

Even if you were able to get hold of the terms sheets, offering memoranda and other documents related to these investments, good luck understanding the unique features involved in each and every one of these highly complex products. Further, the investment strategies and portfolio composition of hedge funds and hedge fund of funds can be changed at any time.

That domestic equity, long-only, unleveraged fund you invested in today may become global, short and levered to the max tomorrow. With respect to hedge fund of funds, you will not even know who’s managing your money or where your money is being custodied. Caymans? Bermuda? Guatemala? Who knows?

Structured notes, hedge funds and hedge fund of funds are purchased for discretionary clients by private banks because they pay significantly higher fees to the bank.

A private bank may earn 20 to 50 basis points in revenue sharing by steering client portfolios into mutual funds managed by others. (Private banks may deny they receive these revenue sharing payments but, trust me, they do.)

A bank may earn far more – 100 to 150 basis points—from proprietary mutual funds. This is still chump change.

Exponentially greater fees, say 3% to 8% and performance fees of 40%, can be earned by the bank from alternative investments. Given the financial pressure banks are under today, is it any surprise where they’re steering investors? But that doesn’t make it right. These discretionary investment managers are supposed to be guided by what’s best for their clients—held to a fiduciary standard of care. Unfortunately, no regulator is scrutinizing the investment management activities of private banks which are not required to register with the SEC.

Investing client assets in high risk, high fees products that do not perform competitively is a violation of applicable fiduciary duties, in my opinion. Whenever I have examined the performance of these private bank investment products (net of all fees) compared to relevant benchmarks, the perfomance is not just bad—its horrific. T-bill performance for Madoff-size risk.

Since the financial meltdown of 2008, private bankers have been busy devising schemes to both maximize the fees they earn from wealthy clients, as well as make it more difficult for clients who wake up to discover they’ve been hosed, to fire them.

The new financial products and strategies that private bankers have been sneaking into client portfolios in recent years serve a purpose that has nothing to do with what’s best for clients. It’s all about improving the bottomline of the private banks. Unfortunately transferring wealth from client accounts is the means to the end that private banks are seeking.

Structured notes, hedge funds, hedge fund of funds and other high risk investment products lack transparency and liquidity and are hard-to-value assets. As a seasoned investigator I can assure you, it is impossible for you to evaluate and monitor the risks related to these investments. Don’t even try to.

Even if you were able to get hold of the terms sheets, offering memoranda and other documents related to these investments, good luck understanding the unique features involved in each and every one of these highly complex products. Further, the investment strategies and portfolio composition of hedge funds and hedge fund of funds can be changed at any time.

That domestic equity, long-only, unleveraged fund you invested in today may become global, short and levered to the max tomorrow. With respect to hedge fund of funds, you will not even know who’s managing your money or where your money is being custodied. Caymans? Bermuda? Guatemala? Who knows?

Structured notes, hedge funds and hedge fund of funds are purchased for discretionary clients by private banks because they pay significantly higher fees to the bank.

A private bank may earn 20 to 50 basis points in revenue sharing by steering client portfolios into mutual funds managed by others. (Private banks may deny they receive these revenue sharing payments but, trust me, they do.)

A bank may earn far more – 100 to 150 basis points—from proprietary mutual funds. This is still chump change.

Exponentially greater fees, say 3% to 8% and performance fees of 40%, can be earned by the bank from alternative investments. Given the financial pressure banks are under today, is it any surprise where they’re steering investors? But that doesn’t make it right. These discretionary investment managers are supposed to be guided by what’s best for their clients—held to a fiduciary standard of care. Unfortunately, no regulator is scrutinizing the investment management activities of private banks which are not required to register with the SEC.

Investing client assets in high risk, high fees products that do not perform competitively is a violation of applicable fiduciary duties, in my opinion. Whenever I have examined the performance of these private bank investment products (net of all fees) compared to relevant benchmarks, the perfomance is not just bad—its horrific. T-bill performance for Madoff-size risk.

HK regulator bows to private banking demands

Hong Kong’s banking regulator has bowed to private banking industry demands to cut red tape in a bid to help the Chinese territory compete better with Singapore.

Norman Chan, chief executive of the Hong Kong Monetary Authority, told bankers in a speech that was made public on Wednesday that his “vision” was for Hong Kong to become “the most competitive and dynamic private banking hub in the region”.

Private bankers in Hong Kong had sought rule changes to address concerns that the city is falling further behind Singapore – the leading Asian wealth management centre – particularly as more wealthy Chinese look to move their money outside the mainland.

Singapore, with 48 private banks, is the main base for private banks seeking to gain market share in Asia, according to Celent, an arm of consultancy Oliver Wyman. This is partly because of the city-state’s privacy protection laws, in addition to its lack of estate duties, which Hong Kong only repealed in 2010.

Mr Chan announced key rule changes and in a separate letter sent to chief executives pledged to make the regulations “more user friendly”.

But he warned the changes could not be an excuse to compromise investor protection, particularly when it came to making sure clients understood the products they were buying. He told bankers in the predominantly Cantonese-speaking city that they needed to improve their Mandarin Chinese skills to ensure they could communicate properly with mainland clients.

“It is hard to imagine that quality service can be provided to a mainland customer who does not speak English or Cantonese if the account manager cannot communicate in Putonghua [Mandarin],” Mr Chan said.

He added that it would be “helpful if important contracts or documents are written in bilingual forms”, again to help mainland Chinese clients.

Silvan Colani, deputy chief executive of Liechtenstein’s LGT Bank in Asia, welcomed the efforts to clearly distinguish private banking from retail banking.

“We fully agree with the HKMA that Hong Kong has the potential to be a leading private banking hub for Asia, given that Singapore is arguably at a more advanced stage,” he said.

The pressure for rule changes has grown since widespread losses among retail investors on Lehman Brothers-related investments led to a regulatory crackdown that hampered private banks’ dealings with wealthy clients.

Alongside making clearer the distinction between wealthy clients and ordinary retail customers, the HKMA has relaxed requirements for the wealthy to undergo suitability assessments for every product, saying they could instead be assessed for a portfolio of investments when they first became a client.

Alan Ewins, a partner at Allen & Overy in Hong Kong, said the adoption of the “portfolio” suitability assessment standard, and the classification of private banking customers, were key developments for the industry. But he said wealth managers outside of the banking sector could now be left at a disadvantage.

“[Mr Chan’s letter] shows the need for a co-ordinated approach by regulators, given the existence of private wealth arms of non-banks where there clearly needs to be a level [regulatory] playing field. They were not catered for here,” he said.

More than US$5tn of the roughly US$11tn of assets held by non-Japanese wealthy people in Asia is in the hands of people with $1m-$5m each. According to Oliver Wyman, this is exactly the population of private banking clients that were not distinguished under the current Hong Kong rules.

Mr Chan said such people could be highly seasoned investors or “unsophisticated clients with only very basic investment knowledge, notwithstanding [their] substantial wealth”.

“Private banks must ensure that their account managers take extra care in offering investment advice and marketing investment products to the less sophisticated clients,” he said.

Swiss minister sees U.S. tax deal by November

U.S. officials seem to want an end to a dispute over wealthy Americans with hidden Swiss offshore bank accounts before the U.S. presidential election in November, the Swiss finance minister said in a newspaper interview on Saturday.

"My impression at the moment is that the U.S. wants a solution by the elections. Both sides endeavour to find a solution in the foreseeable future," Switzerland's finance minister Eveline Widmer-Schlumpf told Basler Zeitung.

Eleven Swiss banks - including Credit Suisse and Julius Baer - are under investigation by the United States for aiding U.S. citizens suspected of dodging taxes with the help of offshore bank accounts.

Switzerland wants the investigations dropped, in exchange for payment of fines and the transfer of names of thousands of U.S. bank clients. At the same time, Switzerland is seeking a deal to shield the remainder of its 300 or so banks from U.S. prosecution.

The talks appear to have stalled in recent months. A visit by Widmer-Schlumpf to Washington in April brought no breakthrough.

The U.S. prosecutor most closely linked with piercing the veil of Swiss bank secrecy, Kevin Downing, quit to join a law firm earlier this month, a move which experts say won't hinder U.S. efforts to pursue Swiss banks.

Bribery investigations underway in Senegal

Two ministers under former Senegalese President Abdoulaye Wade and the country’s current Senate chief have all been called in for police questioning as the new administration works to fulfill its pledge to tackle past corruption.

According to local media, police plan to talk to at least three more former Wade ministers as part of their investigation into bribery under the previous president.

After President Macky Sall was elected in March of this year, he vowed to hold the former president’s government accountable for any past misconduct. These investigations into possible bribes are in the preliminary stages, said Dakar-based lawyer Mouhamed Kebe.

“Under the Wade regime, many of his ministers had been involved in some non-transparent transactions. It seemed that a lot of them became very, very rich in a very short time,” said Kebe. “Very recently the current minister of mining is saying that he has seen a lot of contracts between the state and mining corporations where it is obvious that there is some case of bribery.”

But the matter is also complicated by the fact that President Sall, himself, was a high-ranking minister under Mr. Wade. His experience under the former president included stints both as mining minister and as prime minister.

“Some people from the side of Wade are saying if you are investigating, President Macky Sall should be investigated as well, because he is a former minister of Wade and his former prime minister, and he became rich more than he should do,” said Kebe.

The lawyer added that it is too early in the Sall presidency to tell if the judiciary will be able to act independently of the president’s office. But he said, so far, many are hopeful that these preliminary investigations indicate this government will maintain oversight.

Police have so far questioned former ministers Farba Senghor and Samuel Sarr, who each held a variety of positions in Mr. Wade’s cabinet. They have also questioned Pape Diop, the current president of Senegal’s Senate.

Local media reported that police have also requested to question Karim Wade, son of the former president, who also served in various ministerial roles.

Tax evasion eating into Italian GDP

More than a quarter of the Italian economy eludes taxation, due to underground and criminal economic activities that push up borrowing costs and discourage investment in the country's most vulnerable regions, a senior Bank of Italy official said Wednesday.

"Knowing an enemy's size and potential to create damage is essential in defining a winning strategy," Anna Tarantola, deputy director-general of the central bank, told the parliamentary anti-mafia committee in Rome.

Her estimate that 27.4% of gross domestic product in the euro zone's third-largest economy is off the books comes at a time when authorities in the region are contemplating steps toward a fiscal union. Italian government officials say they are often reminded by their German counterparts that mutualizing obligations is a political non-starter if burdens aren't properly shouldered.

Late last month the European Commission pressed Italy to take "further determined action" to tackle the scourge of tax evasion. Prime Minister Mario Monti vowed a "tougher stance in the future" on tax dodgers in an interview to Catholic weekly Famiglia Cristiana.

Ms Tarantola cited a Bank of Italy study estimating that 16.5% of Italian GDP was underground and another 10.9% of GDP consisted of criminal activity such as prostitution and drugs.

If the state levied revenue on more than EUR400 billion in unrecorded activity at the 45% tax rate applied to the economy at large, Italy could eliminate its EUR2 trillion in public debt in less than a decade, or halve it to the critical 60%-of-GDP level by 2017.

Italy's heavy sovereign debt load is now 120% of GDP, the same as 20 years ago, even though successive governments have spent more than EUR500 billion less on providing public services than they have taken in taxes over that time, amassing primary budget surpluses more than twice as large as those of larger Germany, said Marco Fortis, an economist at the Milan-based Edison Foundation.

Monti has raised taxes and promised to curb public spending further in an effort to build up Italy's primary budget surplus--a measure that excludes interest payments on outstanding public debt--to above 5% of GDP from around zero in 2011. "That's just inevitable for countries with our kind of large debt load," he said at a recent conference in Florence.

However, the tax-centered fiscal tightening he approved in an emergency budget law shortly after replacing Silvio Berlusconi as prime minister and forming a national emergency government late last year is cramping an already weak economy. Italian GDP is now in its fourth consecutive quarterly contraction, the jobless rate rose in April to an all-time high of 10.2% and the government on Tuesday played down data that suggested tax receipts are behind schedule.

Some Italians, especially labor unions representing workers who are taxed even before they get paid, have called on the government to overhaul its strategy. They have suggested, for example, bigger penalties for tax evasion and introduction of a wealth tax. Tax evasion has helped give Italians an average household wealth eight times greater than disposable income, according to the central bank, a higher level than in Germany, France or the U.S.

Enrico Giovannini, president of the national statistics institute Istat, notes that at 17% of GDP, tax evasion accounts for a third of all private economic activity.

"Tax evasion is a plague," Audit Court President Luigi Giampaolino intoned in his annual report to lawmakers on Tuesday.

Ms Tarantola said the underground economy is also hindering business growth and investment, citing a central bank review of 170,000 companies and 839 banks that found companies pay higher interest rates on loans in areas of the country where fraud is more concentrated. Moreover, those companies are required to offer more collateral to obtain loans and tend to be offered only lines of credit on terms that allow for easy and quick recall, rather than longer-term loans designed to be repaid from the cash flow the funding helps generate, she said.

Banks should pay closer attention to borrowers' balance sheets for signs of criminal infiltration, she said, adding that the state's pilot program of using only designated and monitored bank accounts for all payments related to execution of public works has shown some success.

While local stereotypes suggest tax evasion is particularly rife in southern Italy--where Istat says only 43.3% of adults hold formal jobs--more detailed studies show that the size of both the underground and criminal economies is larger in northern Italian provinces than southern ones, Ms Tarantola said.

Kuwait leads in private wealth booked offshore

Private financial wealth in Middle East and Africa grew by 4.7 percent in 2011, according to a new report by The Boston Consulting Group (BCG). The report, entitled The Battle to Regain Strength: Global Wealth 2012, is BCG’s twelfth annual look at the global wealth-management industry and addresses the current size of the market, the state of offshore wealth, the performance levels of leading institutions, the emergence of alternative business models, and key trends that all players must adapt to.

According to the report, private financial wealth in Middle East and Africa grew to $4.5 trillion in 2011, up from $4.3 trillion in 2010, marking a 4.7 percent increase. Furthermore, it is expected to grow by a compound annual growth rate (CAGR) of 6.6 percent by 2016, to reach $6.1 trillion, largely as a result of continued strong GDP expansion in oil-rich countries.

Dr Sven-Olaf Vathje, Partner and Managing Director at BCG Middle East said: “We see this growth despite the fact that Middle Eastern and African stock markets suffered from the political instability caused by the uprisings across the Arab world in 2011. Despite this, the region’s private wealth grew in 2011 driven by high savings rates and strong economic growth in commodity-rich countries such as Saudi Arabia and Qatar. The wealth held in bonds rose by 13.3 percent, and cash and deposits grew by 5.1 percent – only the amount of wealth held in equities decreased by 2.6 percent, mostly driven by weak market performance.”

The BCG study also estimates that between 2011 and 2016, private financial wealth in the region will grow by a CAGR of 8 percent for households worth more than $100 million, 8 percent for households worth between $1-$100 million and 5 percent for households worth less than $1 million. “In 2011, Qatar, Kuwait, UAE and Bahrain were among the top ten countries in the world by proportion of millionaire households,” Markus Massi, Partner and Managing Director at BCG Middle East added. “Qatar stood at second place with 14.3 percent millionaire households; Kuwait came in third (11.8 percent); the UAE came in sixth (5 percent); and Bahrain stood at tenth place (3.2 percent).”

In terms of proportion of $100 million-plus, ultra-high-net-worth (UHNW) households, Kuwait and Qatar each had 6 UHNW households per 100,000 households, while the UAE had 4 UHNW households per 100,000 households. For private financial wealth originating from Middle East and Africa in 2011, Switzerland was the biggest offshore center attracting $0.56 trillion, followed by the UK drawing $0.33 trillion.

In fact, with over a third of all assets booked abroad in 2011, Middle East and Africa had the highest proportion of offshore wealth in the world. In terms of percentage of private wealth booked offshore, Kuwait (53 percent) took the lead in the region, followed by UAE (52 percent), Tunisia (45 percent), Bahrain (37 percent), Lebanon (34 percent) and Morocco (30 percent). As a regional offshore financial center Dubai held assets worth $0.2 trillion with Saudi Arabia, Kuwait, India, Iran and Turkey as the top five sources of offshore wealth.

Global action on tax evasion has largely failed, study shows

The most concerted global push ever undertaken against international tax evasion has failed to reverse the flow of funds to offshore financial centres, according to banking industry data.

Despite unprecedented action from political leaders, and a blizzard of bilateral co-operation treaties entered into by offshore centres, deposit data from the Bank of International Settlements (BIS) shows bank accounts in tax havens still held $2.7 trillion last year – about the same amount as in 2007.

Niels Johannesen and Gabriel Zucman, academics who were granted access to a rarely seen breakdown of BIS data, concluded: "So far, the G20 tax haven crackdown has … largely failed … Treaties have led to a modest relocation of bank deposits between tax havens but have not triggered significant flows of funds out of tax havens."

Their findings are in sharp contrast to the official verdict on the G20 initiative in London in 2009. Last November Angel Gurria, general-secretary of the Organisation for Economic Co-operation and Development, the body whose job is to oversee the crackdown, told the G20 in Cannes: "The era of bank secrecy is over." Acknowledging work remained to be done in some areas, he nevertheless insisted: "It is now no longer possible to hide assets or income without risking detection." The excuse fell flat with his audience.

Presented with Johannesen and Zucman's findings last week, Pascal Saint-Amans, the OECD's head of tax, said: "It's an interesting survey, but perhaps it is published a bit early. Let's see what the impact is in a couple of years."

However, tax campaigners claim the latest study shows getting offshore centres to sign bilateral co-operation treaties is an ineffective means of tackling the problem. Weakly worded treaties, they argue, allow signatories to request financial details only where they can already demonstrate suspect evasion activity. Reformers have called for more robust transparency treaties to weed out tax evaders.

Adding to the challenge facing tax authorities is the widespread use of corporate structures spanning multiple havens. Johannesen and Zucman's study found that some $550bn – about a quarter of all deposits in tax havens – was owned by individuals or companies in other havens. The British Virgin Islands and Panama are popular jurisdictions for such holding companies.

Money flowing to opaque offshore financial centres has in recent years been the subject of intense political scrutiny as many of the world's largest economies – not least the US and Britain – have been straining to raise sufficient taxes to pay for public services and to service rising debts without choking off economic growth.

The G20 crackdown has pressured many offshore financial centres to sign co-operation treaties. Jersey and Guernsey have signed 18 and 19 such treaties respectively. According to Johannesen and Zucman, BIS data suggests that these bilateral treaties typically lead to a 3.8% fall in the deposits held on behalf of individuals or companies from the treaty partner.

Bank deposits in Jersey have dropped by more than a half, a fall of $110bn over four years; deposits in Guernsey have declined by 15%. By contrast, Johannesen and Zucman said, Cyprus has signed only two co-operation treaties meeting OECD criteria and saw deposit levels rise by 60%.

"The deposit gains and losses correlate strongly with the number of treaties signed by each haven," the academics found. "The least compliant havens have attracted new clients, while the most compliant have lost some, leaving roughly unchanged the total amount of wealth managed in tax havens."

However, they also noted that those withdrawing deposits around the time of co-operation treaties – possible tax evaders – were frequently shifting their wealth to other, similarly secretive, offshore centres where no such equivalent treaty existed.

"Alternative markets will develop whenever and wherever the free market provides less than optimal opportunities for personal financial growth," the report concluded.

Fibre optic cable connects to Seychelles

The Seychelles East Africa System fibre optic cable has reached that country Thursday at Beau Vallon Bay, heralding another 'first' for Seychelles together with a new era of transformation in society and the key to the future of the country.

The President James Michel and Vice-President Danny Faure witnessed the arrival and connection of the cable at a ceremony held on the beach in front of La Plage Restaurant.

The event was also attended by the Minister for Natural Resources and Industry, Peter Sinon, the Principal Secretary for Information Communication Technology, Benjamin Choppy, and the Principal Secretary for Presidential Affairs, Lise Bastienne, the Cable & Wireless Chief Executive Officer, Charles Hammond, and the Airtel Seychelles Managing Director, Tsiresy Randriamampionon, together with dignitaries, partners in the project, school children and engineers.

“It is not every day that history is made. And today we are making history, with the arrival of a revolutionary connection of the Seychelles East Africa System.

"It is a milestone in our country’s proud history as an independent nation in the global communication village. It is a special moment which has the potential for transforming our economy and our way of life for the better,” said President Michel in his address following the arrival of the cable.

President Michel noted that this week marked the first anniversary of his second term in Office and that as the Seychellois people elected him on the platform of his commitment to build a New Seychelles, assuring that he would not waver nor be distracted in the pursuit of this goal.

“The transformation of the New Seychelles rests on a knowledge economy, on a knowledge-based society, stimulated by our youth, who live and thrive through IT innovation. Without the proper tools and resources at our disposal, we shall not succeed in our venture.

The arrival of this fibre optic cable is one of the many pillars that will raise the edifice of this New Seychelles, and provide the opportunities for its development….Its connection to our shores today heralds yet another transformation in our society… new opportunities for e-commerce, faster communication as well as business and technological innovation.”

Mr. Michel recalled that Seychelles had become connected to the world for the first time by a telegraph cable some 120 years ago, when the cable was laid between Zanzibar and Seychelles and Aden, and that since then, the major communications technology developments had all propelled the country into societal change in the way that people lived, learned and conducted business.

“We may be living on islands in the Indian Ocean, a thousand miles away from the closest continent, but our information ‘connectivity’ has assured that we steadily become closer to our neighbours, closer to our far-flung relatives and friends, and just a ‘click’ away from every corner of the earth.”

The new cable will dramatically enhance Seychelles' communications facilities. Already known for its eco-tourism and liberal, non-intrusive financial system, the added resources will greatly expand the country's capacity to provide offshore financial services to the global community.

The cable project, which links Seychelles to Tanzania, is a three-party public private partnership, with the participation of the Government of Seychelles, Cable & Wireless (Seychelles) and Airtel (Seychelles).

The project is costing approximately Euro 27 million to implement and this has been financed through equity from the three shareholders and loans from the European Investment Bank (EIB) and the African Development Bank (AfDB).

The first telegraph cable was laid some 120 years ago between Zanzibar and Seychelles. In 1945 the first radio broadcasts started.

Offshore bank accounts: no Americans allowed

In a piece for Bloomberg, reporter Sanat Vallikappen begins, “Go away, American millionaires.” Valliikappen then goes on to explain that wealth management firms the world over are declining to open offshore accounts for Americans.

“I don’t open U.S. accounts, period,” said Su Shan Tan, head of private banking at Singapore-based DBS, Southeast Asia’s largest lender, who described regulatory attitudes toward U.S. clients as “Draconian.”

It hadn’t been easy for Americans doing financial business overseas, but since the 2010 passage of the Foreign Account Tax Compliance Act, known as Fatca, which seeks to prevent tax evasion by Americans with offshore accounts, opening a foreign bank account has become mission impossible.

Valliikappen writes,

The 2010 law, to be phased in starting Jan. 1, 2013, requires financial institutions based outside the U.S. to obtain and report information about income and interest payments accrued to the accounts of American clients. It means additional compliance costs for banks and fewer investment options and advisers for all U.S. citizens living abroad, which could affect their ability to generate returns.

The Institute of International Bankers and the European Banking Federation said in an April 30 letter to the IRS, that the 400 pages of rules and regulations issued by the American tax authority create Unnecessary burdens and costs.”

Massachusetts Democrat Richard Neal says the government needs to crack down on offshore tax dodgers. Mr. Neal wants tax money and doesn’t care much about privacy and all that.

“People should know, and the IRS should know, what money is being held offshore and for what purpose,” Neal said. “I don’t think there’s anything unreasonable about that.”

One young gentleman that believed Rep. Neal and the other thieves on Capitol Hill to be a bit too greedy and unreasonable is Eduardo Saverin, the billionaire co- founder of Facebook Inc. Before Facebook does its public offering, and the price of Facebook stock is quoted daily, making Saverin’s wealth undistributable, he decided to renounce his American citizenship and head for Singapore.

Bloomberg reports,

Saverin, 30, joins a growing number of people giving up U.S. citizenship, a move that can trim their tax liabilities in that country. The Brazilian-born resident of Singapore is one of several people who helped Mark Zuckerberg start Facebook in a Harvard University dorm and stand to reap billions of dollars after the world’s largest social network holds its IPO.

Singapore doesn’t have a capital gains tax. It does tax income earned in that nation, as well as “certain foreign- sourced income,” according to a government website on tax policies there.

Saverin has to pay the U.S. government an exit tax but doing it before the IPO was wise. Renouncing your citizenship well in advance of an IPO is “a very smart idea,” from a tax standpoint, said Reuven S. Avi-Yonah, director of the international tax program at the University of Michigan’s law school. “Once it’s public you can’t fool around with the value.”

There are a few Mises Institute supporters who have paid the American exit tax and now live in Singapore. None I’ve spoken with regret it.

“It’s a loss for the U.S. to have many well-educated people who actually have a great deal of affection for America make that choice,” said Richard Weisman, an attorney at Baker & McKenzie in Hong Kong. “The tax cost, complexity and the traps for the unwary are among the considerations.”

While Mr. Neal chases away taxpayers, the only ones left will be tax eaters.