Swiss Banks to divulge names of US account holders

Edited time: September 01, 2013 18:43

AFP Photo / Fabrice Coffrini

About a hundred Swiss banks will avoid prosecution by divulging the names of US clients who have allegedly avoided tax by using secret accounts. The banks could face fines of up to 50 percent of the asset value if they provide full disclosure.

The settlement will apply to second-tier Swiss banks and will be open to banks not already under a US criminal investigation. This rules out the second-largest Swiss bank, Credit Suisse; the largest European bank HSBC Holdings Plc and Julius Baer Group Ltd, as well as several regional banks.

Under the deal, each bank will set its own non-prosecution or deferred-prosecution agreement with the US authorities. "The program is intended to enable every Swiss bank that is not already under criminal investigation to find a path to resolution," the US Department of Justice said in a statement.

The fines are set to reach up to 50 percent of the aggregate value of any undeclared accounts held by wealthy Americans, depending on the time the accounts were opened. To decide whether they can afford paying billions of dollars in fines and participate in the deal, Swiss banks will have to assess the cost of potential penalties versus the risk of US prosecution.

"It's a choice between two evils," a tax lawyer with Poledna Boss Kurer AG in Zurich, Walter Boss, told Reuters. If they don't cooperate with the US, the US might indict them," he stated.

It's hoped the breakthrough agreement with the world’s largest off-shore financial center with about $2.2 trillion of assets will boost the US campaign against tax evasion by citizens hiding their funds abroad. It means, Switzerland will finally cease to be a "secret banking heaven" for Americans out of reach of US tax authorities.

"This program will significantly enhance the Justice Department's ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States," US Attorney General Eric Holder said in a statement.

"In addition to strengthening our partnership with the Swiss government, the program's requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the US Treasury from across the globe," he added.  

Some unidentified Swiss banks who are not cooperating with the US justice system, could face punishment, the Attorney General has warned, saying that the agreement creates "significant risks for individuals and banks that continue to fail to cooperate, including for those Swiss banks that facilitated US tax evasion but fail to cooperate now, for all US taxpayers who think that they can continue to hide income and assets in offshore banks, and for those advisors and others who facilitated these crimes."

The Swiss Bankers Association said the deal "enables all banks in Switzerland to settle their US past quickly and conclusively and creates the necessary legal certainty."

In May, the Swiss government agreed to meet US demands and disclose bank client names in a bid to resolve the long-standing tax-evasion dispute between the two countries.

Over a dozen Swiss banks are said to be under the US investigation, with the authorities searching for funds hidden in bank accounts in giants like Credit Suisse. The US Attorney's Office has been reportedly investigating Credit Suisse over mortgage-backed securities sold by the bank. In November, the bank settled the case without admitting wrongdoing and it agreed to a $120-million settlement with the US Securities and Exchange Commission over civil charges stemming from the bank's sale of risky mortgage bonds to investors before the crisis.  

Earlier this year the Swiss government also ordered its third largest private bank, Julius Baer, to hand over data on US clients.

In January Switzerland’s oldest private bank, Wegelin & Co, said it would close down for good after over 250 years, following its guilty plea to charges of helping prosperous Americans hide more than $1.2 billion from the Internal Revenue Service through secret accounts.  

The US authorities’ biggest success so far came in 2009 when Switzerland’s largest bank, UBS, agreed to give away some 4,450 client names and paid a $780 million settlement after admitting to selling tax-evasion services to Americans.
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