Swiss Agree on Program for Banks to Settle U.S. Dispute
The Swiss Finance Ministry has been instructed to complete work on a joint statement with the U.S., the Bern-based government said in an announcement today. “It shouldn’t be too long” before the statement is signed, Andre Simonazzi, a government spokesman, told reporters in the Swiss capital.
The agreement is the result of more than two years of negotiations over U.S. probes of at least a dozen banks, including Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER), which allegedly helped Americans evade taxes. While some of those banks are already in settlement talks, the U.S. Justice Department wants to widen its crackdown by forcing other Swiss wealth managers to disclose data on cross-border accounts.
“I would imagine the Justice Department would want the end game to be a voluntary disclosure program for banks where they can come forward, admit their wrongdoing, if any, avoid prosecution, and not subject themselves to further scrutiny by the United States,” said Jeffrey Neiman, a former U.S. tax prosecutor based in Fort Lauderdale, Florida.
The Swiss Bankers Association, which represents more than 300 banks, welcomed the government’s announcement.
“The program enables all banks in Switzerland to settle their U.S. past quickly and conclusively and creates the necessary legal certainty,” the Basel-based association said in a statement today.
Switzerland, the world’s largest offshore financial center with about $2.2 trillion of assets, wants to prevent another bank suffering the fate of Wegelin & Co., which was indicted last year. Wegelin, the country’s oldest bank, pleaded guilty in January to helping U.S. taxpayers hide assets and has since closed its doors.
Wegelin took over undeclared American clients from UBS AG. The biggest Swiss bank avoided prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over client names.
The U.S. wants lists of suspected tax evaders who shifted accounts from one bank to another, the Swiss government has said.
Dena Iverson, a spokeswoman for the Department of Justice, didn’t immediately respond to a call and e-mail seeking comment.
Credit Suisse, Julius Baer and HSBC Holdings Plc (HSBA)’s Swiss private bank have said they expect to pay a fine to settle their disputes with the U.S.
“We welcome this as a step towards a resolution of the issue as a whole,” said Andres Luther, a spokesman for Credit Suisse, commenting on the Swiss government statement.
Today’s announcement doesn’t affect HSBC as it’s already under investigation, according to David Bruegger, a Zurich-based spokesman for the bank.
“We are continuing our discussions,” he said. “We are in close contact with the authorities and will stay in touch until a solution is found.”
Julius Baer declined to comment.
The announcement comes after the Swiss Parliament in June rejected a bill that would have given banks a yearlong legal reprieve and allowed them to settle with the U.S. by handing over information on employees and third parties who worked with American clients. It would also have established legal protection for bank employees.
“The Swiss have finally decided to deal with the issue of creating an exception to Swiss bank secrecy by employing an administrative procedure to avoid legal challenges and a public referendum, which could otherwise defeat any settlement,” said Milan Patel, a former Internal Revenue Service trial attorney who is now a partner at Zurich-based law firm Anaford AG. “It also avoids the long diplomatic procedures.”
The banks under investigation by the Justice Department can use a 1996 tax agreement to respond to requests for names of American clients, the Swiss government said on May 29. That depends on the U.S. authorities providing a sufficiently detailed description of the matter to establish suspicion of fraud or similar offenses.
The U.S. Senate has yet to ratify a 2009 protocol revising the 1996 accord to make it easier for Swiss banks to hand over data on clients suspected of tax evasion to the IRS.
Banks that aren’t currently under investigation that may have breached U.S. laws with undeclared assets would have to pay fines on accounts exceeding 50,000 francs ($54,407) under the proposal, Tages-Anzeiger reported earlier today.
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