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.

US continues hunt for tax dodgers in Swiss banks

Switzerland's oldest private bank says it will provide bank data to the US (Keystone)

June 14, 2013 - 12:21

The United States tax authorities have filed a request for legal assistance to identify former American clients of the private bank Wegelin who are suspected of tax dodging. It is the fourth such request against a Swiss financial institute.

Wegelin, which announced at the beginning of this year it would close its doors, on Friday confirmed reports that it had received notification by Switzerland’s Federal Tax Authorities to comply with the US request, based on a 1996 double taxation agreement.

A bank official added that Wegelin would submit the necessary information.

The request focuses on former Wegelin clients who were listed as beneficiaries of asset management companies between 2002 and 2012 and are suspected of fiscal fraud, according to the Neue Zürcher Zeitung newspaper on Friday.

The Federal Tax Administration declined to confirm the report or give further information.

Wegelin technically still exists but sold its non-US business and pleaded guilty to charges of helping wealthy American clients evade taxes.

It is the fourth such demand against Swiss banks. The country’s two main banks, UBS and Credit Suisse, have also faced requests against a particular group of clients over the past few years.

Two weeks ago, the private bank Julius Baer was also notified that it was subject of a similar request by Washington.

Experts point out that further queries by the US will follow, targeting about ten other Swiss banks under legal investigations.

Banking deal

Parliament is currently debating a law allowing banks to provide information to the US justice department without breaking Swiss banking secrecy rules.

The Senate approved the controversial draft law on Wednesday, but the House of Representatives is to discuss the issue next week.

However, the requests for Julius Baer and Wegelin are separate from the bill, according to observers.

The US government agency for tax collection and tax law enforcement has been the driving force behind the legal enquiries, while the US justice department has now taken over the settlement with Swiss banks suspected of violating US law.

Senate approves US tax probes bill

The Senate has passed a government plan to let Swiss banks settle US tax probes (Keystone)

June 12, 2013 - 15:26

The Swiss Senate has passed a government plan to let Swiss banks settle tax probes by the United States. The draft law now goes to the House of Representatives next week.

The 46-seat chamber on Wednesday approved the plan, designed to solve the issue without overturning Swiss banking secrecy laws, by 24 votes to 15 with two abstentions.

Lawmakers are divided over the plan to allow Swiss banks, suspected of helping wealthy Americans hide their money, to disclose data to US prosecutors to help settle investigations into tax evasion.

If the draft law succeeds, Swiss banks then have 120 days to hand over the internal information to US authorities.

The cumbersomely named “Federal Act on Measures to Facilitate the Resolution of the Tax Dispute between Swiss Banks and the United States” intends to put legacy issues to bed.

US prosecutors must still formally ask the Swiss authorities for client names and account details under the existing double taxation agreement between the two countries.

Swiss banks would also be authorised to pass on the names of their own employees that have been involved in US client business.

Swiss take first step to end US tax spat

One vote passed for Finance Minister Eveline Widmer-Schlumpf, at least one more to go (Keystone)

by Urs Geiser, swissinfo.ch
June 12, 2013 - 18:00

A draft law allowing Swiss banks to pass data to the United States justice authorities has won approval by the Senate. The other parliamentary chamber, the House of Representatives, is set to discuss the controversial issue next week.

Following more than 20 hours of debate, the Senate on Wednesday approved the divisive bill by 24 votes to 15.

Supporters, mainly from the centrist parties, warned of the potentially disastrous consequences for indicted banks, the finance industry and also for the Swiss economy if the government-sponsored bill was rejected.

The law would help draw a line under a dark chapter of banking history, said Senator Pirmin Bischof, while This Jenny expressed concerns about possible job losses in the banking industry.

Other supporters of the draft law stressed that a proposed deal between the banks and the US would not put a financial burden on Swiss taxpayers.

“Given the choice between an emergency landing and a crash, I prefer the former,” said Werner Luginbühl.

Opponents, mainly from the centre-right Radical Party, criticised the cabinet as it refused to provide additional information on the proposed deal, notably the amount of fines the banks could face. The cabinet was also accused of failing to take responsibility by deferring the decision to parliament.

Many speakers warned that acceptance of the bill would encourage other countries in Europe to follow the US example and exert additional pressure on Switzerland.

Despite all the differences, both sides agreed that the US programme – offered to Swiss banks suspected of helping wealthy American clients stash away money from the tax authorities – amounted to blackmail.

“Given the choice between an emergency landing and a crash, I prefer the former. ”

Werner Luginbühl

Responsibilities

Finance Minister Eveline Widmer-Schlumpf reiterated the importance of a correct legal framework for the banks to settle investigations into tax evasion.

She called on senators to give banks the opportunity to take the responsibility for their mistakes and avoid further damaging the reputation of the Swiss financial centre. Otherwise the problems risked becoming a never-ending story, she added.

During the debate the Senate decided to amend the draft law, boosting the right of accountants and tax lawyers to challenge decisions to hand over certain data. The financial regulator is to be mandated to draw up a detailed report about the management of assets by foreign clients.

 

Banking secrecy

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Tax evasion

As part of the deal, Swiss banks can disclose their US dealings, including names of bank staff and third parties such as accountants and tax lawyers who helped Americans evade taxes.

This would pave the way for individual banks to reach their own agreements with the US authorities without breaking Swiss law and violating banking secrecy rules. It is said that the settlements could include fines worth several billion dollars for Swiss banks.

At least 14 Swiss financial institutions have been under investigation, suspected of helping US citizens evade taxes. Two financial institutes have closed down over the past six months.

Switzerland’s oldest private bank, Wegelin, was forced to shut its doors following a US indictment in January. It admitted to wrongdoing and paid $58 million (CHF54 million) in fines.

In 2009, the country’s biggest bank UBS was forced to pay a fine of $780 million and deliver the names of more than 4,500 clients to avoid indictment, handing information that allowed the US authorities to then pursue other Swiss banks.

Next hurdle

Following the Senate approval on Wednesday, the bill now goes to the House of Representatives, where opposition to the deal is likely to be tougher.

The law, to be in place for 12 months only, will have to win a qualified majority – more than half of all members of each chamber, not just a majority of those present – to come into force at the beginning of next month.

If parliament fails to meet the deadline, Washington has threatened to withdraw its offer for the Swiss banks to hand over internal information over the next 120 days to avoid an indictment.

In a related business, the Senate is due to begin discussions next week on a tax compliance bill with Washington.

The Foreign Account Tax Compliance Act (FATCA) obliges foreign firms to report offshore accounts belonging to US taxpayers that amount to more than $50,000. Critics say the bill further undermines the cherished Swiss banking secrecy laws.

Time line - Swiss banks in US tax row

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: Second biggest bank, Credit Suisse, is 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 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 begins discussions on banking deal.

Princely Liechtenstein bank keen for clarity on tax

June 12, 2013 - 10:59

By Emma Thomasson

ZURICH (Reuters) - Prince Max von und zu Liechtenstein, chief executive of Liechtenstein's biggest bank LGT, said it was striking how fast opinions on tax evasion had shifted since 2008, when stolen data revealed hundreds of Germans had hidden assets in the principality.

But the Prince, who runs the royal-family-owned bank, is not worried by an international push to fight tax evasion and expects Swiss and Liechtenstein banks to flourish if disputes over untaxed assets are settled quickly.

"The data theft of 2008 was the first example of that change of attitude but at least it put us ahead of the game. What doesn't kill you makes you stronger," he said in an interview.

Discussing the outlook for Liechtenstein banking over a lunch of monkfish and asparagus at a luxury Zurich hotel, Prince Max was relaxed about the future. "People are focusing on the threats but there are more chances than threats."

Secrecy has fostered an usually large banking industry in the tiny principality wedged between Austria and Switzerland, helping to make the 36,000 inhabitants of a territory slightly smaller than Washington D.C. among the world's wealthiest. The banking sector contributes about a third of national output.

But LGT was one of the first major banks to be caught up in an international clamp down on tax evasion since the financial crisis. In the lean times since then, governments from the United States to Germany and France have had to try to boost tax receipts to fill empty coffers.

LGT, which had expanded aggressively overseas, suffered a client exodus in 2008 and 2009 after it featured in a U.S. Senate report on tax evasion.

But the bank has recovered faster than LLB and VP Bank, the country's second and third biggest banks, reporting net asset inflows of 10.5 billion Swiss francs (7.1 billion pounds) in 2012, taking total assets under management to 102.1 billion.

Prince Max says customers are attracted by LGT's "Princely Portfolio" that allows them to mirror the strategy used for the royal family fortune, estimated to be as much as 8 billion francs.

"If you delegate investment decisions to somebody else you should only do that if that person has his own skin in the game," he said. "We offer our clients the same sort of deal."

"Having been through ups and downs in our 900-year history, one of the things that has helped the family survive is that we're well diversified."

Harvard graduate Prince Max, 44, worked for JP Morgan for more than a decade in New York, London and Germany before taking over at LGT in 2006 from his uncle Prince Philipp. Prince Max is the second son of Prince Hans-Adam, who handed over daily running of the principality to his oldest son Prince Alois in 2004.

SUSPICIOUS MAIL

Prince Max said the failure in December of a Swiss tax deal with Germany - which Liechtenstein had hoped to mimic - and U.S. investigations into Swiss banks - including the Swiss arm of rival LLB - could scare clients again in the short term.

"Big clients have come back but smaller clients are worried that they might look suspicious if they get mail from a Swiss or Liechtenstein bank," he said.

That is why he is supportive of attempts to settle those tax disputes. Liechtenstein's prime minister told Reuters last month the country was prepared to discuss an automatic exchange of client data with the European Union after Austria and Luxembourg pledged to drop bank secrecy.

"If information exchange comes with the EU it will strengthen our ability to attract capital again from EU countries - because it provides legal certainty," he said.

EU finance ministers gave their officials approval in May to start formal negotiations with Switzerland, Liechtenstein, San Marino, Andorra and Monaco about surrendering bank data on an automatic basis, exposing savers to tax claims.

Despite the upheaval in the private banking business caused by the tax issue, LGT is not targeting more acquisitions after it bought the Swiss business of Dresdner Bank in 2009.

"Why should we run the risk and spend a lot for growth, which we can achieve ourselves in two or three years if we let our people do their job?" he said.

(Editing by Jane Merriman

US requests bank data from Julius Baer

Julius Baer is the third Swiss bank to take in a request to reveal American client data (sporst via Flickr Creative Commons)

May 28, 2013 - 12:00

The United States has increased pressure on Switzerland to find a lasting solution to the tax evasion row between the two countries by demanding information on Julius Baer bank clients suspected of dodging taxes.

The US request for administrative assistance was made to the Swiss authorities under the terms of an existing double taxation agreement. Julius Baer has confirmed that it is the third Swiss bank to be targeted by the US in such a way following earlier requests for data relating to UBS and Credit Suisse clients.

Switzerland is also negotiating a separate deal with the US that aims to put an end to intrusive demands for information and a growing list of criminal proceedings against Swiss banks and their employees. Swiss Finance Minister Eveline Widmer-Schlumpf said recently that Switzerland was “on the point of presenting a solution” to the ongoing tax evasion row following several years of negotiation.

In the meantime, US authorities have shown no signs of relaxing their investigation into around 13 Swiss banks that are strongly suspected of aiding and abetting US tax evaders.

The latest official request for information follows the indictment of a Swiss banker and lawyer by a Manhattan court in April.

Seeking resolution

The Swiss financial sector has also expressed impatience at finally finding a lasting solution that covers both future tax relations between the two countries and resolves the legacy issues of the past.

“It’s in the best interest of the financial sector and each individual bank to resolve the US issue quickly and completely,” Urs Rohner, chairman of the board of directors at Credit Suisse, told the Neue Zürcher Zeitung newspaper on Tuesday.

“A solution that seems painful at first sight is better than no solution,” he added. “To believe that one can push this issue to the back burner and that it will dissolve over time is unrealistic. That will not happen.”

Switzerland’s banking sector has been under enormous pressure from the US since UBS was caught red-handed helping tax evaders in 2009. The bank was forced to pay a huge fine and hand over thousands of client files to the US tax authorities, effectively ending Switzerland’s long-standing tradition of strict banking secrecy.

Last year Switzerland’s oldest private bank, Wegelin, collapsed under the weight of a US prosecution after poaching American clients from UBS and offering a sanctuary for their undeclared assets.

The European Union is also queuing up to negotiate Switzerland’s implementation of amendments to its Savings Directive, which would enforce similar conditions on financial entities as those sought by the US.

All together now: Finance Minister Eveline Widmer-Schlumpf believes Swiss tax laws need more harmony (Keystone)

May 30, 2013 - 16:15

The current distinction between tax evasion and tax fraud is unsatisfactory, according to Finance Minister Eveline Widmer-Schlumpf, explaining why the cabinet wanted to reform the tax penal law.

False accounting is potentially tax fraud, she told the media on Thursday, while repeatedly failing to declare income is considered tax evasion. “There is no logical difference,” she told journalists in Bern on Thursday.

Widmer-Schlumpf said the aim of the revision was an efficient tax penal law with high legal certainty that would also have a preventive effect.

“It should be worthwhile for people to be honest over their taxes,” she said.

New measures would include differentiating between simple evasion, qualified evasion (currently considered fraud) and qualified evasion of large amounts.

She pointed out that the current distinction made the work of the cantonal tax authorities more difficult, since they are not allowed to consult bank data in cases of suspected tax evasion. The federal tax authorities, however, have this right when it comes to investigating indirect taxes such as VAT.

The proposed amendment would mean that violations would be judged according to their seriousness, and the same criteria would apply to all.

The authorities would need concrete indications that an attempt had been made to defraud them before they could request data from the bank.

“In these cases banking secrecy should not be a shield for tax evaders,” she said, adding that nothing would change for the vast majority of citizens.