Come clean about your secret accounts, some Swiss banks are urging their American clients as the banks prepare to hand over information about such holdings in exchange for U.S. prosecutorial lenience for aiding tax evasion.
The new program is a deal between the U.S. Department of Justice and the Swiss Federal Department of Finance looking to crack down on American tax evasion from around the world.
Together, they offer a “nonprosecution agreement” to any Swiss bank “that has reason to believe it may have committed tax-related offenses.”
Under the agreement banks must disclose any cross-border business with U.S. accounts, the names of individuals who operated or supervised the accounts, and even how the bank attracted account holders. Plus, financial institutions will have to pay between 20 percent and 50 percent of the total dollar value of secret accounts.
In exchange, the banks will not be prosecuted for any tax-related offenses or unreported monetary transactions.
It is widely expected that most institutions will comply rather than face the wrath of the U.S. government.
Though 14 Swiss banks are already under investigation for helping American clients avoid U.S. taxes and have no chance at avoiding prosecution, the remaining institutions have until Dec. 31, 2013, to accept Washington's offer.
They have little choice in the matter. In recent years Swiss banks have paid billions in fines after admitting they helped Americans evade U.S. taxes, and the country’s oldest private bank has even had to shut its doors.
“Your account information may be subject to a treaty request from the United States to the Swiss Federal Tax Administration, which may result in your account information being turned over to the DOJ or the IRS,” reads one note from Comer Bank, obtained by Politico, to an American customer.
“A disclosure… can be used by U.S. authorities for law enforcement actions, including … criminal proceedings,” it continues.
In 2009, the Swiss banking giant UBS (USBN.VX) admitted to helping Americans evade taxes and paid a $780 million settlement.
In January of this year, Wegelin & Co., the oldest Swiss private bank, was fined $57.6 million after it confessed to helping taxpayers living abroad avoid paying the U.S. government. Founded in 1741, the firm announced earlier this year that it “will cease to operate as a bank,” according to the Guardian.
Bank Frey & Co AG, another Swiss institution, said it ceased operations in October because of a “tax dispute with the USA.” Despite a lack of formal charges to the bank itself, a former executive and an attorney at a Swiss law firm involved with the bank were both named in a U.S. indictment a few months earlier, the Wall Street Journal reported.
Since 2009, more than 30 banking professionals and 68 U.S. accountholders have been charged, according to an August press release from the Department of Justice.
“The program will significantly enhance the Justice Department’s ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States,” said Attorney General Eric Holder in the statement.
There are 14 Swiss financial institutions currently under investigation that include Credit Suisse Group (CSGN.VX), Julius Baer Group (BAER.VX), the Swiss arm of HSBC, Pictet & Cie, and Group AG. These banks are not eligible for a nonprosecution agreement.
“In addition to strengthening our partnership with the Swiss government, the program’s requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back the U.S. treasury from across the globe," Holder said.
Kathleen is a money reporter at International Business Times with an eye on the Africa business story....