The Tax Times: U.S. Turns Up The Pressure On Swiss Banks!

Thousands of Swiss bank workers have seen their data handed over to justice authorities in the United States and are now living with a considerable amount of uncertainty.

Two years ago the US Department of Justice (DOJ) started investigating about ten Swiss banks suspected of helping thousands of wealthy Americans illegally evade taxes.

The DOJ demanded that Swiss banks supply it with all the data of controversial transactions, including the names of employees who dealt with clients subject to US tax laws and lists of American clients who have moved assets out of their accounts to another bank (Leavers Lists).

The Swiss Banks - US Tax Time Line:

2009: Switzerland’s biggest bank UBS agrees to turn over more than 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.
July 2011: The second-biggest bank, Credit Suisse, comes under criminal investigation by US. The bank later makes a provision for a potential fine of CHF295 million.
February 2012: US justice department indicts Wegelin, Switzerland's oldest private bank, on charges that it enabled wealthy Americans to evade taxes on at least $1.2 billion hidden in offshore accounts.
June 2012: US treasury department reaches a tentative agreement with Switzerland to help banks comply with US tax evasion regulations.
June 2012: Bank Julius Baer hands 2,500 employee names to US authorities in a bid to free itself from the tax probe, according to lawyers.
August 2012: Global bank HSBC hands over details of current and former employees to the US authorities.
November 2012: Private bank Pictet confirms it is also under investigation by the US.
December 2012: Two bankers and one former employee of the Zürcher Kantonalbank charged by US, accused of helping US clients avoid taxes.
January 2013: Wegelin private bank shuts its doors, following a guilty plea to charges of helping wealthy Americans evade taxes through secret accounts. It agrees to pay nearly $58 million in fines on top of $16.3 million in forfeitures already obtained by the authorities.
May 2013: Swiss government presents bill to parliament that would let Swiss banks hand over internal information to US to avoid threatened criminal charges – though the banks still face fines likely to total billions of dollars.The bill aims to save the banks from heavier punishment in the United States for helping wealthy tax cheats, by sidestepping its secrecy laws to let bankers disclose data to US prosecutors.
June 2013: Parliament rejects the so-called Lex USA bill, telling the government to make the decision.
July 3, 2013: The government announces a new data transfer framework for banks. Finance Minister Eveline Widmer-Schlumpf presents a “plan B”, under which banks which cooperated with the United States authorities would be deemed not to have violated Article 271 of the penal code, which forbids collaboration with foreign authorities.

The uncertainty felt by bank workers certainly didn’t ease after the Swiss parliament’s rejection in June of the “Lex USA”, a deal the Swiss cabinet hoped would fix the legal conditions for handing over data and solve the tax evasion dispute between the two countries.

At the beginning of July, Finance Minister Eveline Widmer-Schlumpf presented a “plan B”, under which the cabinet agreed to give banks special permission to cooperate with the United States authorities, paving the way for financial institutions to share data in a bid to avoid criminal charges for allegedly helping tax dodgers.

It seems that Swiss banks blacklisted by the US Department of Justice would be barred from making dollar payments via New York or London clearing accounts, effectively destroying their international business; so non compliance with US authorities in Not an Option.

With many Swiss banks under U.S. investigation for helping American clients dodge taxes, roughly a Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank; the government is anxious to secure an agreement that satisfies U.S. demands for data to help catch the tax cheats but also wants to preserve at least some elements of its cherished tradition of banking secrecy, which has long been a key part of the Alpine nation's allure for depositors.

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It remains to be seen how the United States will react to "plan B".

UBS, Switzerland's biggest bank, has said it could see client money outflows of 12 billion Swiss francs ($13 billion) in Europe as a result of a crackdown on tax evasion there, while rival Credit Suisse said clients in western Europe could withdraw up to $37 billion in the next few years.

The sector is unsure how much an eventual settlement with the United States will cost them, but total fines are likely to run into billions of dollars.

In the meantime, up to 100 others of Switzerland's 300 or so banks are suspected of having tax evaders among their clients. They have no clear guidance on what data they will need to send.

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