Swiss Banks May Pay Billions and Disclose More Accountholder Names

We may soon see a resolution to the US’s continuing probe of the offshore tax evasion through secret banks at prestigious Swiss financial institutions and the ongoing negotiations regarding what kind of monetary payment and account disclosure will settle the criminal probes. See Voreacos, Wille & Broom, Swiss Banks Said Ready to Pay Billions, Disclose Customer Names, San Francisco Chronicle (Bloomberg.com, Oct. 24, 2011).

Confidential sources for the Bloomberg article suggest that the deal will involve billions and the turnover of data on 5-10,000 accounts. Id. Banks involved range from the biggest European bank to much smaller Israeli and Lichtenstein banks. The group of 11 also includes HSBC Holdings Plc, the biggest European bank, Basler Kantonalbank, Wegelin & Co., Zuercher Kantonalbank, and Julius Baer Group Ltd., the people said. Three Israeli banks — Bank Leumi Le-Israel BM, Bank Hapoalim BM, and Mizrahi-Tefahot Bank Ltd. — are on the list, as well as Liechtensteinische Landesbank AG and an asset manager, NZB AG, according to the people. Id. Several of them have already given the US statistical data, which will provide some basis for the negotiation over account information to be turned over in any deal. The problem remains, however, that the Swiss concept of tax fraud/tax evasion is narrower than the US concept, and the country is still trying to avoid handing over information on accounts if the US does not already have identifying information about account holders. “Switzerland is continuing talks with the U.S. authorities on administrative assistance in cases of tax fraud and tax evasion,” said Norbert Baerlocher, spokesman for the Swiss embassy in Washington, in a statement. “Any exchange of client data can occur only within the scope of the current legal system, in accordance with the procedures provided for in the existing or the new double-taxation agreement with the USA.” Id. Although there has been some movement towards more transparency in Switzerland, the banking secrecy remains an obstacle to fair administration of other countries’ tax laws. The Tax Justice Network, for instance, rated Switzerland “at the top of its financial secrecy index” in spite of the changes. Id. Accordingly, in instances where the US would use “John Doe” summonses, the Swiss will still likely claim that is insufficient to require them to provide information on US holders of Swiss accounts. The US has been able to break that to some extent through its collection of information from taxpayers who participated in the voluntary disclosure program, which promised lower penalties than allowed under the law (and under certain conditions, no criminal prosecution) for taxpayers who came forward voluntarily and provided complete information about their accounts (names of bankers and those who brokered the arrangement, etc.). About 30,000 Americans participated. The DOJ and IRS are casting a wide net as they try to identify Americans guilty of offshore tax evasion,” said Aaron D. Schumacher, a Geneva-based wealth planning attorney, with Withers LLP. “They obtained a lot of information about various Swiss banks from the participants in the voluntary disclosure programs and that has likely enabled the recent indictments we’ve seen,” he said. “More people than we saw previously have come to us looking to renounce their citizenship.” Id. At some point, however, it will be necessary to press for a broader information exchange agreement that finally breaks the banking secrecy that permits banks to assist taxpayers from other countries in evading their tax laws.

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