MONEY laundering is when someone channels the cash from robbery, fraud or expropriation into a Swiss bank account, or an expensive apartment in Manhattan, to make it look clean. So what is the term for sullying profits from legal enterprise with tax evasion and shenanigans? Money staining, perhaps.

That question came to mind this week when reading about the 30,000 clients of HSBC’s Swiss private bank in the mid-2000s. Some were apparently avoiding domestic taxes; others were behaving lawfully but very oddly, emerging from its branch in Geneva holding cases of used banknotes. The activity was not black but nor was it entirely white: there were various shades of grey.

The pariah of the age is the non-dom, a rootless mogul lured to the property and financial safe havens of New York and London with the promise of peace, quiet and generous tax treatment. He buys his apartment on Central Park or house in Mayfair through a shell company, and puts cash in a Swiss bank account, paying the UK government £30,000 in lieu of tax.

Even when all is above board holding wealth in a private bank or in a shell company looks quite like money laundering ... equally concealed from public view. When the legitimately wealthy also evade tax, the distinction starts to wear thin

It is all quite legal but highly aggravating to other taxpayers facing budget deficits and government cutbacks, while struggling to obtain a large enough mortgage to pay for a home that has spiralled in price thanks to low interest rates and a flood of overseas money. The privilege of what the UK government itself calls ‘a very generous tax regime’ is confined to the offshore few.

Spare a thought for the billionaire, whose life is in some respects more challenging than ours. The property story of the week, amid those in Le Monde and The Guardian about HSBC, and a New York Times series about foreigners buying apartments on Central Park, was how Mark Zuckerberg, founder of Facebook, came to acquire all of the property around his house.

A property developer who bought a house behind Mr Zuckerberg’s in Palo Alto told him that he intended to build a huge new one that would overlook his bedroom. Not only did Mr Zuckerberg then pay $1.7m to Mircea Voskerician, the developer, for the right to buy the property, according to the latter — but his financial adviser acquired three other nearby properties for $39m.

For private banks, it means protecting and investing legal wealth, rather than aiding tax evasion and money laundering

Mr Voskerician then sued for breach of contract, claiming that his neighbour had promised both to compensate him and to introduce him to useful contacts in Silicon Valley, which Mr Zuckerberg denies. The developer’s tactics worked because Facebook’s founder is a billionaire living in an ordinary, if expensive, neighbourhood.

A rich person’s problem, but it indicates why many of the wealthy — especially the 128,000 global citizens estimated by Credit Suisse to hold assets of more than $50m — stay hidden. One banker told The Guardian that he put £5m in HSBC’s private bank to keep his bonus secret from colleagues.

There are decent reasons apart from tax evasion, or even legal tax avoidance, for the wealthy to put their money in Swiss banks. The traditional one is that it is not secure at home, where it may be taken by a different government or, in Russia’s case, the same president in a different mood. There is a history of the arbitrary seizure of European citizens’ property, after all.

Even when all is above board, however, holding wealth in a private bank or in a shell company looks quite like money laundering. The cash ends up in similar places, equally concealed from public view. When the legitimately wealthy also evade tax, the distinction starts to wear thin.

This is not a healthy state of affairs for governments that appear to be cutting a tax break for the global elite at the expense of their own citizens, or for private banks that tarnish the reputations of all clients by facilitating the sins of a few, or for entrepreneurs who work very hard to create their wealth. They could all do more to fix it.

For the UK government, that means reforming the non-domiciled tax break, which favours the wealthy by allowing people who pay a £30,000 to £50,000 annual levy to shelter offshore income and assets. Many qualify by virtue of a parent being foreign, which is bizarrely arbitrary.

The UK and other countries, including the US, should also crack down on abuse of shell companies, the financial vehicle of choice for money launderers. Most of the looting of wealth from developing countries is carried out using shell companies and offshore accounts. Using the same mechanism to hide the true ownership of expensive homes is increasingly common.

For private banks, it means protecting and investing legal wealth, rather than aiding tax evasion and money laundering. There are enough people with clean money — including 45,000 with assets of more than $100m — for this alone to be a very profitable business.

“In the past, the Swiss private banking industry operated very differently to the way it does today,” HSBC said this week in its mea culpa. Perhaps so, but I recall Swiss banks claiming in the mid-1990s — a decade before this happened — that tax evasion was in the past. After a while, one stops believing.

As for the rich, it means asking themselves if they want to resemble money launderers, carrying piles of notes out of private banks to sidestep taxes that other people pay. Even if they are within the local law, even if they are not mugged by the banks of the Rhône, is it any way to behave?

john.gapper@ft.com

Published in Dawn, Economic & Business, February 16th, 2015

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