Court verdict seals bank client data transfer

The Federal Court believes the US data request is no "fishing expedition". (Keystone)

July 5, 2013 - 17:18

Switzerland’s highest court has finally approved the handover of Credit Suisse bank client data to the United States following a lengthy legal battle that challenged the original government decision to allow the transfer.

The Federal Court threw out two test complaints from bank clients on Friday, paving the way for the handover of information relating to 96 requests made by the US Internal Revenue Service (IRS) through the double taxation agreement (DTA) mechanism between the two countries.

The final verdict followed a Federal Administrative Court ruling last year that prohibited the data transfer on the grounds that the request was too general and did not adequately identify bank clients.

The IRS re-submitted the request in July of last year giving fuller details. In March 2013 the Federal Administrative Court found that the new request sufficiently met the DTA requirements and approved the data release. It was a last ditch appeal to the Federal Court that was turned down on Friday.

The US authorities have to date submitted requests for administrative assistance in tracking down tax cheats at four Swiss banks, starting with UBS and Credit Suisse. In May of this year, Julius Bär revealed it had also been targeted and a month later Wegelin was also named.

Wegelin, Switzerland’s oldest private bank, has already effectively gone out of business having collapsed under the weight of US criminal proceedings over its role in helping US citizens dodge taxes.

Political deals

UBS was the first Swiss bank to feel the wrath of the US authorities in 2009 when it was forced to pay a $780 million (CHF742 million) fine. The Swiss government later had to intervene to allow the bank to release the details of 4,450 clients to the US, striking the first fatal blow against Swiss banking secrecy.

The US currently has 14 Swiss banks in its legal sights that are faced with possible criminal indictments. On Wednesday, the Swiss government outlined measures aimed at helping all Swiss banks suspected of aiding US tax cheats to avoid prosecution for their past behaviour.

Banks can apply for permission to hand over information in relation with their business dealings in the US. The data could include names of employees and third parties, such as lawyers and asset managers, but not those of their clients or details of accounts.

US requests for information on clients must still be made through the DTA channels.

Switzerland has also signed up to the US Foreign Account Tax Compliance Act (FATCA) that will regularise their future dealings with US clients. Banks will be allowed to name US clients to the IRS providing the customer gives consent.