What Happens Next To Swiss-Based Private Banking? Eleven Offshore Banks On The US Radar

1. Credit Suisse (including Clariden Leu)

2. HSBC Holdings

3. Basler Kantonalbank

4. Wegelin & Co

5. Zuercher Kantonalbank

6. Julius Baer Group

7. Bank Leumi Le-Israel

8. Bank Hapoalim

9. Mizrahi-Tefahot Bank

10. Liechtensteinische Landesbank

11. Neue Zuercher Bank (NZB)

Swiss and Israeli Banks

Following the precedent set by the United States government’s settlement in 2009 with UBS, the largest Swiss bank, US authorities have offered eleven financial institutions in Switzerland and Israel a settlement agreement in which the US government’s investigations in those financial institutions -- for aiding tax evasion -- and potential prosecution would be dropped. For some, such as the oldest private bank in Switzerland -- Wegelin -- this is now too late. [Reference: What Really Happened To The Oldest Bank in Switzerland? Wegelin: Death Throes of Swiss Banking Secrecy & Asymmetric Risk to Swiss Banks, ATCA 5000 Briefing, February 1st, 2012]

Clarification added 13 hours ago:

Terms of US Government Agreement

The terms of the US government agreement would be similar to the UBS settlement in 2009 and would require each of the eleven Swiss and Israeli financial institutions to share client data regarding US citizens and, most likely, pay a hefty fine. American officials are also concerned that these 11 banks appear to have accepted hidden money from American clients who fled UBS in the wake of its scrutiny. Further, assertions were made by Swiss officials at the time that offshore tax evasion would not be tolerated under the cloak of Swiss banking secrecy rules. However, the question arises whether those assurances have been breached. The scrutiny comes during a wide-ranging campaign by the US Department of Justice (DoJ) to force nearly a dozen Swiss banks now under scrutiny to pay billions of dollars in fines collectively and to admit to criminal wrongdoing. The late F Scott Fitzgerald is quoted as saying: “Switzerland is a country where very few things begin, but many things end.”

Handing Over Client Data

The US Internal Revenue Service (IRS) reported that eight Swiss banks, including Credit Suisse, Julius Baer, and Basler Kantonalbank turned over US client data on taxpayers suspected of tax evasion on January 30th, 2012. This does not put an end to the negotiations between the US and Swiss governments. Three more banks are still expected to turn over client data and a total of 11 banks are expected to pay heavy fines. Based on the settlement in 2009 with UBS it appears that the Swiss and Israeli banks would need to turn over, at the very least, the following:

1. Correspondence between the Swiss and Israeli banks and US clients (which includes notes made during telephone conversations and meetings);
2. Internal memoranda relating to US clients;
3. Correspondence between the Swiss and Israeli Banks and third parties concerning US clients; and
4. Documents related to funds transferred to third parties on behalf of US clients.

Global Pursuit

The known countries involved in the US government's far-reaching investigations include:

1. Switzerland
2. Liechtenstein
3. Israel
4. India
5. Singapore
6. Hong Kong

The risk of criminal and/or substantial civil penalties grows greater as the US Internal Revenue Service (IRS) and Department of Justice (DoJ) complete more bank-investigations and as foreign banks continue to co-operate with US government officials.

Israeli Connection

The US pursuit of offshore tax evaders includes Israel, where US authorities are scrutinising three of Israel's largest banks -- Bank Leumi Le-Israel, Bank Hapoalim and Mizrahi-Tefahot Bank -- over suspicions their Swiss outposts helped American clients evade taxes. The banks are under scrutiny by the US DoJ's criminal tax division. The shift to Israel from Switzerland -- for years the main focus of the DoJ's campaign against offshore private banking secrecy-- signals the broadening of a landmark probe by the agency that began in 2007 with UBS. The shift also opens up a potential sore spot in the historically close relationship between the US and Israel, a key diplomatic and military ally in the Middle East that is the biggest recipient of US aid. Tracing non-compliant funds from Swiss banks to Israeli banks is indicative of the expanding global scrutiny and effectiveness of the US tax investigations. The scrutiny of the three Swiss branches of the Israeli banks has gained significant momentum but is yet to reach the level of Credit Suisse or of HSBC Holdings -- a major European bank -- and Basler Kantonalbank, a Swiss cantonal bank.