Update on U.S.-Swiss Bank Matters - Of Apologies, Wages of Sin, and Leavers (9/4/13)

I offer this morning two news reports I recommend to viewers needing the daily fix on Swiss developments.

The three articles are:

• Giles Broom, Swiss Bankers' Odier Sees U.S. Tax Spat Resolved by 2015 (Bloomberg 9/3/13), here.
• Patrick Temple-West and Kevin Drawbaugh, Offshore tax-dodger dragnet widens with U.S.-Swiss bank deal: lawyers (Reuters 9/3/13), here.
• Swiss banks apologize for assisting tax cheats (CNBC by Reuters 9/3/13), here.

In my comments, I refer to these articles in shorthand as Bloomberg, Reuters and CNBC, respectively.

The key points are

1.  As is often the case where someone has been caught with his hands in the cookie jar, there is an apology, sincere or not.  (Often the regret is at having gotten caught.)  At any rate. here is the mea culpa as articulated (CNBC article):

"It was not because we lacked skills and knowledge that we found ourselves in these unfortunate situations. It was because we acted wrongly and we displayed wrong conduct," Swiss bankers association chairman Patrick Odier told a news conference on Tuesday. 

"I regret this all the more because we have damaged the reputation of the entire Swiss financial center."

2.  The banker thinks that most Swiss banks subject to the regime can bear the cost, but that: (CNBC article): "There may be a few exceptions: banks which concentrated too much on these business activities may run into difficulties."  (See also the Bloomberg article.)

3.  The banker predicted that Swiss banks will reach final settlements by 2015, a 12-18 month process.

4.  The 14 banks not covered by the settlement regime because they are already under criminal prosecution may be able to settle their situations prior to 2015.  (Bloomberg article.)  JAT Note:  Of course, the expected cost of settlement will be greater.

5.  A key part of the settlement deal will to be to identify so-called "leavers" -- U.S. depositors who moved their funds to other banks to continue to hide them.  (Reuters article.)  I previously noted that the U.S. was keenly interested in leavers moving among Swiss banks as the U.S. focused on those with sufficient U.S. nexus to purse, in the hopes that some banks could protect them if they had no U.S. nexus.  The Reuters article indicates that the U.S. is now keenly interested in where the money went outside Switzerland.  With that data required under the settlement regime, the U.S. can target the more egregious offenders in other countries and bring the long arm of U.S. law (or power) to bear.

6.  With regard to these leavers, Scott Michel, here, a prominent player, said (Reuters article):  "Moving your money around to avoid disclosure is clear evidence of criminal intent." JAT Note:  Those players who are at high risk of being identified in the process should join the program (and, likely, not opt out).

7.  The Bloomberg article says that "Since 2009, the U.S. has prosecuted 68 account holders and more than 30 banking professionals for offshore tax crimes."  Actually, my list in the spreadsheet indicates 90 account holder charges (I call them taxpayer charges), but 7 of those were charged prior to 2009.  I think DOJ Tax may have propagated the number of 68, but I can't account yet for the difference between that number and my spreadsheet.  I will try to work on that sometime later this week and post an updated spreadsheet.



Addendum 9/4/13 3:30 pm:

This is another good article with some additional nuance.  Lynnley Browning, How tax dodgers can survive the Swiss bank bust (CNN Money 9/3/13), here.  Excerpts are:

[The settlement] strikes at the heart of the rest of the Swiss banking industry, more than 300 banks, by offering them an ultimatum: Rat out American clients and the lawyers and advisers who help them, fork over their bank data and pay hefty fines, or risk prosecution. 

Perhaps most importantly, the settlement divides those hundreds of banks into three groups -- those that can avoid prosecution by outing clients; those that have nothing to disclose; and those that are complying with a separate, new and onerous anti-tax evasion law known as the Foreign Account Tax Compliance Act, or Fatca. 

Apart from the 14 banks under grand jury probes, American bank clients appear to have no idea which category their banks falls into. For taxpayers with a lot to lose, that makes the calculus of deciding whether to risk continuing to hide assets; to come forward to the IRS; or to make a "quiet disclosure" by sneaking in an amended tax return even more difficult, tax lawyers said 

* * * * 

With an estimated $2.2 trillion in offshore assets, more than any other global haven, the Alpine nation could find that a quarter of its storied private banks cease to exist within three years, according to a recent study by KPMG and the University of St. Gallen (located in the small mountain town where Wegelin, the country's oldest bank, was indicted last year for serving tax-dodging Americans. The bank, which once counted Napoleon as a client, no longer exists. 

* * * * 

Of the IRS disclosures [under the OVDI/P programs], "you can imagine that's maybe 20% or 15% of the total out there," said a senior American source briefed on the matter.