Switzerland to Allow Its Banks to Sidestep Secrecy Laws

Switzerland Frees Banks to Resolve U.S. Tax Inquiries

By LYNNLEY BROWNING and JULIA WERDIGIER 

The Swiss government said it would let its banks disclose names of clients in a move that would help to settle a dispute between the United States and Switzerland. 

 May 29, 2013, 8:08 am 

By LYNNLEY BROWNING and JULIA WERDIGIER

Peter Schneider/Keystone, via Associated PressEveline Widmer-Schlumpf, Switzerland’s finance minister, at a news conference in Bern, Switzerland.

11:56 a.m. | Updated
The Swiss government said on Wednesday that it would allow its banks to disclose information on American clients with hidden accounts, a watershed move intended to help resolve a long-running dispute with the United States over tax evasion.
The decision, which comes amid widening scrutiny in Europe of tax havens, is a turning point in what has been an escalating conflict between Switzerland and the United States.
Switzerland’s finance minister said the move would enable Swiss banks to accept an offer by the United States government to hand over client details and pay fines in exchange for a promise against future legal repercussions.
“It is important for us to be able to let the past be the past,” Eveline Widmer-Schlumpf, the finance minister, said at a news briefing in Bern, Switzerland. She declined to give any details about the program, but said banks would have one year to decide whether to accept the American offer.

• Switzerland Weighs Deal in Tax Cases (May 28, 2013)

American clients whose names are handed over by Swiss banks but who have not voluntarily disclosed hidden accounts to the Internal Revenue Service would likely face criminal tax-evasion charges, lawyers said. Dozens of Americans have been indicted or charged in recent years for failing to disclose their accounts.
Until now, the Swiss government had been resisting cooperation because the secrecy of its banking system has long made country an offshore money haven for wealthy foreigners.
The country is also under growing pressure from the European Union to assist in ferreting out their citizens who have sheltered money using offshore private banking services. Switzerland is not a member of the European Union but nations including France and Germany have tired of watching their citizens squirreling away cash with impunity right across their borders.
The European Union is pushing member nations like Luxembourg and Austria to update their own secrecy rules, meaning the Swiss could soon be without an ally in the bloc and be left vulnerable to pressure from other nations.
Ms. Widmer-Schlumpf said that the government would work with Parliament to quickly pass a new law that would allow Swiss banks to accept the terms of the United States offer, but said the onus would be up to each individual bank to decide whether to participate.
“If banks were not authorized to cooperate with the U.S. authorities, the initiation of further criminal investigations or charges concerning banking institutions could not be ruled out,” a Swiss government statement said. It added that “the uncertainty for the financial center would continue to exist.”
In 2012, the Justice Department indicted Wegelin & Company, Switzerland’s oldest bank. The bank pleaded guilty in January, putting it out of business, and prosecutors have said off the record in recent months that more indictments could be coming.
Calling the decision “a good, a pragmatic solution for the banks to emerge from their past,” Ms. Widmer-Schlumpf said that “we expect this to create the base for banks to again gain some room for maneuver so that calm can return to the sector.”
She declined to say how much banks might have to pay. But she said the Swiss government would not make any payments as part of the agreement. Sources briefed on the matter say that the total fines could reach at least $7 billion to $10 billion, and that to ease any financial pressure on the banks, the Swiss government might advance the sums and then seek reimbursement from the banks.
Igor Moser, a spokesman for Zurcher Kantonalbank, one of around a dozen Swiss and Swiss-style banks under criminal scrutiny by American prosecutors, said that if Swiss Parliament approves the government’s decision, the bank “will be able to agree on an individual solution with the US authorities.” He added that “a possible penalty will be part of this individual agreement.”
Ms. Widmer-Schlumpf hinted that the repercussions for banks that actively helped clients evade taxes after 2009 would be bigger than for those that stopped such activities that year. “All banks knew after 2009 that they can no longer do all sorts of businesses,” she said.
It was in 2009 that UBS, the largest Swiss bank, agreed to enter into a deferred-prosecution agreement with the United States. The bank eventually turned over 4,450 client names and paid a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans. Justice Department authorities were incensed that after the UBS deal, other Swiss banks took in American clients fleeing UBS to provide shelters for their income, according to court documents in cases of some indicted American clients.
Also in 2009, Switzerland and the United States signed a protocol amending a 1996 tax treaty governing exchanges of information on Americans suspected of avoiding taxes. While the protocol has been approved by the Swiss parliament, it has been held up in the Senate, blocked by Senator Rand Paul, a Republican from Kentucky. The protocol makes it easier for American authorities to seek client and account data from Switzerland.
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