The Bank for International Settlements (BIS), headquartered in Basel, Switzerland, isn’t something you read about every day. The average American is unlikely to even know the BIS exists, much less how this organization actually functions.
Owned by 63 central banks, the BIS, the self-styled “bank for central banks,” plays a very important role in global financial regulation. For instance, since 1988, the BIS has set recommended minimum capital adequacy ratios for banks worldwide. (We’ve long maintained these ratios are too low to effectively protect depositors, and the recent collapse of Silicon Valley Bank and Signature Bank proved our point.)
Other key initiatives by the BIS involve central bank digital currencies (CBDCs), which we view as an existential threat to human freedom. Last month, we explained why this threat is so serious, and how Americans will embrace CBDCs in a financial crisis. The BIS is running or has concluded no less than 15 CBDC-related projects, all intended to speed the acceptance of CBDCs by global central banks.
Founded in 1930, the BIS was originally set up to enforce payment of the reparations Germany had promised to pay in the Treaty of Versailles that ended World War I in 1918. Much of the credit for its creation goes to Montagu Norman, at the time, the Director of the UK central bank.
The operations of the BIS are highly opaque. Its legal status is similar to that of a diplomatic mission, and it isn’t subject to Swiss laws. Thus, the BIS facilities in Basel (and in other locations where it has offices) can’t be searched without its permission. As well, correspondence to or from the BIS may not be searched or detained. BIS senior managers enjoy the equivalent of diplomatic immunity in Switzerland. And disputes involving the BIS are handled by arbitration, not through national courts.
Nor is the BIS subject to Swiss taxes, and BIS employees don’t pay Swiss tax on their earnings.
But what we find most fascinating about the BIS is its possible role in facilitating the laundering of trillions of dollars in criminal proceeds, stolen assets, and misdirected government funding. When World War II began in 1939, the BIS followed an official policy of neutrality, but unofficially it collaborated with Nazi Germany to facilitate its access to capital markets to finance its war machine. The BIS also allowed the Nazi central bank to deposit the gold and cash seized during the Nazi occupations of Czechoslovakia and other countries during the war into BIS accounts.
While it’s almost impossible to prove the BIS is laundering money today, it seems to help prevent global megabanks from being held criminally accountable for violations of money laundering laws. A case in point occurred in 2012, when the Department of Justice (DOJ) was about to indict banking giant HSBC and members of its senior management for criminal violations of US money laundering laws.
At that point, George Osborne, then UK Treasury Chancellor, urgently contacted US Attorney General Eric Holder and Treasury Secretary Tim Geithner urging them not to proceed with the indictment. Osborne warned Holder and Geithner that the indictment of HSBC, which the BIS’s Financial Stability Board (FSB) had branded a “systemically important financial institution” (SIFI) could lead to “contagion” and thus pose “very serious implications for financial and economic stability.”
As a result, HSBC was let off the hook after paying a $1.9 billion fine. As some pundits remarked, the bank was “too big to jail.”
We don’t have proof that Osborne acted on behalf of the BIS. But it was the FSB that designated HSBC as a SIFI. And in addition to duties performed for their respective governments, Osborne, Holder, and Geithner all served as FSB members.
But if thanks to BIS intervention, SIFIs can launder money with impunity, it goes a long way toward explaining why no SIFI has ever been indicted, shut down, or its top executives imprisoned for this crime. In effect, it appears that the immunities from investigation the BIS itself enjoys have been extended to SIFIs.
Speculation has even emerged that the BIS might even have a role in the disappearance of $100 trillion or more from US government agencies, which we wrote about in this article. The reasoning is a bit convoluted, but it begins with the fact that Uncle Sam maintains its bank accounts at the New York Federal Reserve Bank, which is in turn owned by its member banks. These include SIFIs like JPMorgan-Chase and Citibank. The member banks also act as custodians for trillions of dollars of securities issued or secured by federal agencies. It’s no exaggeration to conclude that the Fed and its member banks control a large chunk of Uncle Sam’s income and balance sheet.
At the same time, in 2018, the Federal Accounting Standard Advisory Board (FASAB) urgently recommended that a new financial disclosure policy (FASAB Standard 56) take effect for federal agencies. The policy would permit the agencies to prepare two sets of financial statements: an abbreviated one for the general public and a full one available only to those with applicable security clearances.
The recommendation came into effect immediately. It was justified by a concern that the Department of Defense’s (DOD) financial statements would reveal sensitive information that would pose a threat to national security.
Is some (or all) of the missing money being laundered through the Federal Reserve and SIFIs, all protected by BIS immunities and the provisions of FASAB Standard 56? We don’t know the answer, but as Catherine Austin Fitts observes:
New York Fed members/owners can sell US Treasury bonds, put the proceeds in a HUD government account for which their bank serves as agent for the government, and proceed to move that money into a private account. Very few would be the wiser, particularly if the Treasury bonds were not properly recorded on the US Treasury balance sheet or, as now may also be the case, were sheltered by FASAB 56.
But who’s really worried about a missing $94.7 trillion? We can afford it! After all, our government can create as much money as it wants out of thin air. And any government that issues its own currency can always pay its bills with the cash it creates. If investors don’t line up to buy the debt, the Fed will purchase it instead and add those “assets” to its balance sheet through the process of quantitative easing.
Yes, this policy of “Modern Monetary Theory” is inflationary, and sure, the official inflation rate now exceeds 4% annually. (Unofficially, the real inflation rate is closer to 12% per year.)
The machinations of the BIS, the Fed, along with the ability of SIFIs to launder money with impunity, make us want to get as far away from the banking system (including CBDCs) as possible. Precious metals, productive farmland, and international real estate are all asset classes we’ve explored as antidotes to the system of total financial control the BIS and its member central banks are constructing.
We suggest you consider your own Plan B as well.