Swiss parliament rejected a bill designed to resolve a dispute over undeclared bank accounts held by U.S. citizens, potentially setting the stage for American prosecution of the country’s banks.
Members of parliament’s lower house voted 123 to 63 against the bill, which would have allowed Swiss banks to cooperate with the U.S. and to settle a long-running dispute over wealthy American tax evaders. The government has said it has no plan B, in the event of the bill failing to pass.
Switzerland wants to prevent the indictment of another of the country’s banks. Wegelin & Co. was indicted last year and pleaded guilty in January to helping U.S. taxpayers hide assets from the Internal Revenue Service. The bank had taken over clients from UBS AG (UBSN), which avoided prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over client names.
“I don’t think the Americans will really start a wave of indictments -- such a horror scenario is unlikely,” said Peter V. Kunz, a professor of comparative law at the University of Bern. “I do however think the one or other banker could face charges. But no one really knows. The legal risks and the legal uncertainties will remain for the Swiss financial sector. How it all will end is totally up in the air.”
The bill, which the country’s banks supported, divided institutions into four categories based on the size of their American business and allowed them to hand over some information -- though not client names. Parliamentarians criticized it because the terms of the program, such as fines, were determined by the U.S. and hadn’t been made public.
U.S. Department of Justice spokeswoman Dena Iverson declined to comment.
“I see big difficulties after today’s decision,” Swiss Finance Minister Eveline Widmer-Schlumpf told Swiss public broadcaster SRF.
The no vote could lead to a another Swiss bank facing criminal charges in the U.S., which could impact the economy, she said yesterday. Any decree the government could pass instead of a bill would have a smaller scope and not meet all the U.S. requests, she said.
“One can hope that the U.S. side understands” the parliamentary rejection, Widmer-Schlumpf told lawmakers today. “To hope, always is legitimate, also in politics. But one can’t be too disappointed if all hopes aren’t fulfilled.”
The Swiss Bankers Association regretted parliament’s decision, saying it was hard to gauge the consequences of the step for the banking sector and the economy.
Still, “Switzerland must not take the risk of a further indictment of a bank lightly,” it said in a statement, adding it expected the government to “do everything in its power to ensure that a legal framework is created that nevertheless renders the implementation of the U.S. program possible.”
Parliament had been asked by the government to approve the bill in an express procedure, allowing it to go into effect on July 1. The law wouldn’t have affected at least 12 financial institutions, among them Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER), who are already under investigation in the U.S.
“I assume that the U.S. wants to see money as soon as possible and is less interested in how Switzerland solves the problem of the rule of law,” said Andreas Ladner, a professor of public administration at the University of Lausanne.
After the upper house approved the bill last week, the lower house then rejected it yesterday, triggering a process to resolve the disagreement between the two chambers.
The upper house reaffirmed its verdict in favor of the bill earlier today. Both chambers urged the government to solve the disagreement with existing law.
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