Friday, July 12, 2013

Swiss Banks and Swiss Government Move to Resolve Their Spat with the U.S. (7/12/13)

I provide below some links to and excerpts from article describing key aspects of the current state of play in the Swiss / U.S. spat over Swiss banks' participation in lost U.S. tax revenue.  The key point is that the Swiss banks know something bad is in the offing unless they get the UBS result (with or without a DPA, but with no criminal conviction) and without the Wegelin result (prosecution and demise as an entity).

Katharina Bart, Swiss banks seek permission to send data in U.S. probe: sources (Reuters 7/12/13), here.  Excerpts (bold-faced supplied by JAT):
Credit Suisse and Julius Baer are among five Swiss banks which have sought government approval to hand data to U.S. prosecutors in a bid to reach settlements in a long-running tax dispute, four sources familiar with the matter said. 
The requests represent a push towards sealing a final deal for some of the dozen Swiss banks in the crosshairs of U.S. prosecutors for helping wealthy Americans evade taxes through hidden accounts. 
Some of the five, which also include local government-backed banks Zuercher Kantonalbank and Basler Kantonalbank and the Swiss arm of Britain's HSBC, expect the government to approve their request in the coming days, two sources said. 

* * * * 
The five banks have already handed over data on their U.S. dealings as well as staff involved in the offshore business, but the U.S. authorities still want information on where clients closing their accounts moved their money. 
The Swiss government paved the way for the banks to comply last week, saying it would grant them individual permission to deliver exit lists [JAT Note, apparently called "leaver lists in other sources], information which will help investigators pursue tax evaders and their bankers. 
Swiss Finance Minister Eveline Widmer-Schlumpf said last week the move should allow the dozen banks to settle.
* * * * 
Others targeted by U.S. investigators include privately-held Pictet, Liechtenstein Landesbank's Swiss arm and Bank Frey, but it was not immediately clear if or when they might seek Swiss government approval to deliver data. 
While permission to send data on their U.S. dealings would represent a step forward, it doesn't necessarily mean the banks will quickly reach settlements to avert criminal prosecution and settle the matter definitively, two sources said.
Alan Pyke, Swiss Banks Accused Of Aiding U.S. Tax Evasion Will Begin Cooperating (Think Progress 7/12/13), here.  Excerpts:
From 2001-2010, over $3 trillion that should have gone to the U.S. treasury was lost to tax evasion. Eighty-five percent of tax evaders are individuals, according to a Demos report, and most of those individuals evade income taxes by underreporting business income. Not all of the money is simply sitting in vaults in Geneva, but offshore bank accounts are a key component of many common tax evasion schemes. “Swiss secrecy laws have helped to make the country the world’s biggest offshore finance centre,” according to Reuters. 
To understand Switzerland’s motivations in cooperating, it helps to recall the case of the country’s oldest bank, Wegelin & Co. The Justice Department indicted the bank in February of 2012 on tax evasion charges involving $1.2 billion in bank holdings. Eventually the bank plead guilty and was forced to close its doors after 250 years in business. Contrast that with the 2009 case of UBS, which eventually cooperated with DOJ and paid a $780 million fine to settle allegations it helped American clients hide $18 billion from U.S. taxes. UBS is still in business.


  1. From what I've read the data would not include (at this point) client names, but (presumably) would be used to formulate a group request to provide data on accounts meeting certain criteria.

    Regarding UBS, $780 million fine on $18 billion in deposits is 4.33%. A bank that engaged in all kinds of shenanigans pays 4.33% while those in OVDI (many of whom did not engage in shenanigans) pay up to 27.5%.

  2. As to your first paragraph, I do think that is the goal. It creates a two step process to blast out the client data via a group request -- what I call John Doe treaty request.

    Thanks for your comment.

    Jack Townsend


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