Swiss bank Julius Baer hands over 2,500 names to US: report

Swiss private bank Julius Baer handed over to US authorities information on more than 2,500 of its employees as part of Washington's efforts to clamp down on tax evasion, a newspaper reported Friday.

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The Zurich-based bank is believed to be the latest to bend to Washington's demands to release names of staff who could have helped clients avoid paying tax in the United States, Le Temps newspaper said.

In addition to providing personal information about staff to the US tax authorities, Baer is said to have made available personal documents, emails and details of telephone calls.

Such information would make it possible for the US tax authorities to find out the names of Swiss bank clients whose identities are protected by Swiss banking secrecy laws, the report said.

The newspaper cited as its source lawyer Douglas Hornung, the legal representative of a former HSBC executive whose name was one of more than 1,000 given to the US tax office.

Referring to "three different sources" in a recent letter to Swiss president Eveline Widmer-Schlumpf, excepts of which were published by Le Temps, Hornung wrote that Baer "gave more than 2,500 dossiers to the US, and that HSBC had handed over approximately 1,100."

He said that violated Switzerland's federal law on data protection and brings the total number of names handed over by the 11 banks in Washington's sights to 10,000.

The data concerns current and former staff, as well as outside contractors, the report added.

President Widmer-Schlumpf, who is also the country's finance minister, recently announced that she hoped to resolve differences with Washington on the tax issue this year.

"Swiss banks have asked the (Swiss) federal council's authorisation to send information on employees, but not of clients, as part of their investigation by the United States," said a spokeswoman for the State Secretariat for International Financial Matters (SIF).

"This request is independent of the efforts undertaken by the SIF to reach a global solution with the US" similar to those agreed with Germany and Britain, the spokeswoman added.

No one from Julius Baer was available to talk to AFP about the development.

The banks targeted by the United States are: Credit Suisse, Julius Baer, Wegelin, Banque cantonale de
 Zurich (ZKB), la Banque cantonale de Bale (BKB), Neue Zuercher Bank (NZB), HSBC, LLB, in addition to the Israeli banks Leumi, Hapoalim and Mizrahi.

Swiss bank account details opened to taxman

Portuguese taxation authorities are now able to simply request details on any bank account held by a national citizen in Switzerland, Paulo Núncio, the State Secretary for Fiscal Affairs, announced this week.

This follows the signing of an agreement designed to eliminate dual taxation between the two countries but which also specifically stipulates access to Portuguese held accounts.

"Simple to request. The agreement provides for the Portuguese authorities simply requesting the information without any need to provide evidence of malpractice," said Núncio before adding that the Swiss authorities would no longer be able to invoke banking secrecy clauses to prevent such requests."

Emphasising that this would also be the very first time such information would be made available, the state secretary said the measure was part of the government’s overall anti-fraud and tax evasion strategy.

Portugal thus becomes the fifth European Union member state to secure such an information exchange agreement with Switzerland.

Blocher defiant over immunity decision

Former justice minister, Christoph Blocher (Keystone)

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Former justice minister Christoph Blocher has denounced as “purely political” a ruling by a Senate committee that he is not protected by parliamentary immunity in the case of alleged violation of banking secrecy laws.

Interviewed on French-language Swiss public radio on Friday, he said he had simply been doing his work in the case which led to the resignation of Philipp Hildebrand as chairman of the Swiss National Bank on January 9.

The Senate’s legal affairs committee decided by ten votes to three on Thursday that Blocher was not covered for his actions even after he had been sworn in as a member of the House of Representatives, because the act of “encouraging someone to pass on confidential information to the press is not part of the mandate of a member of parliament”.

Hildebrand resigned amid a furore over private foreign currency transactions made by his wife. He was unable to prove he did not have prior knowledge of these, raising the spectre of a conflict of interest.

The story was broken by the German-language weekly Weltwoche, which has close ties to the rightwing Swiss People’s Party of which Blocher is regarded as the strongman.

In early January, the magazine published details of the Hildebrand family’s banking data. The data was illegally copied by an employee of Bank Sarasin, who handed it over to two People’s Party cantonal parliamentarians and to Blocher.

In the wake of the controversy, the Zurich public prosecutor’s office opened a criminal investigation into whether the four men violated Swiss banking legislation.

As a member of the House of Representatives, Blocher claimed parliamentary immunity. But the alleged violations took place just before and just after he was sworn in to parliament.

One issue on which the legal affairs committees of the two chambers had to decide was whether and when he was covered by immunity. The other was whether the nature of the alleged violation was such that the perpetrator was not protected.

While both agree that he was not covered before his swearing in on December 5, the house committee decided in April that he could indeed claim immunity afterwards. That committee will now have to reconsider the issue.

Legal ruling

Speaking to journalists after their ruling, members of the Senate committee made clear that their decision was a purely legal one, to enable the Zurich prosecutor’s office to proceed with its investigation into what are currently merely allegations.

Blocher declared that he has no intention of stepping down from parliament, even if he is found guilty. But he also said that he is not worried at the thought of a court case.

He said in the interview on public radio that he was concerned about the deeper implications of the committees’ ruling.

“It’s not a serious matter for me. I can afford to pay lawyers and so on. But an ordinary member of parliament who isn’t rich can’t do that. Then they won’t feel able to do certain things because they will always be afraid that the prosecutor will come after them, and now we have a parliament which says they are no longer protected by immunity, and then they can’t do their work,” he said.   

Most of the Swiss papers on Friday contented themselves with reporting the facts and comments of the two sides. However, a commentary in the German-language Bund regretted the committees’ decision that immunity comes into force only when a member is sworn in.

“This legalistic point of view makes too much of the act of swearing-in and disregards the basis of parliamentary immunity, which is election by the people,” it said.

While describing the hatred of the People’s Party for Hildebrand as “fanatical”, and regretting the fact that Hildebrand had to step down, the paper points out that thanks to Blocher’s action the National Bank tightened up its rules.

And it warns that Blocher will find a way to make use of the “martyrdom bonus”.

The Neue Zürcher Zeitung for its part points out that the People’s Party had called from the beginning for full light to be shed on the Hildebrand affair. It says lifting Blocher’s immunity will simply enable investigators to look into the circumstances in which data was procured illegally.

“That the trail leads to Christoph Blocher’s home, among other places, is well known. What was cooked up there must also be of interest to a party which is always demanding that nothing remains hidden.” 

Defender of banking secrecy

As part of the criminal investigation, police have questioned and searched the homes and businesses of the four men, including Blocher. According to some press reports, Blocher went so far as to have prompted the bank employee to leak the data.

Ironically, Blocher has always been a staunch defender of Swiss banking secrecy in the face of attacks from abroad. Countries such as the United States have been seeking information about suspected tax evaders with bank accounts in Switzerland.

Blocher has rejected the accusations, claiming he acted only as a “postman”. On December 5, he forwarded the information he had about Hildebrand’s currency dealings to the then Swiss president, Micheline Calmy-Rey.

Indeed, on May 20, Calmy-Rey, from the centre-left Social Democratic Party, defended as “normal” Blocher’s role in passing on details. This action is not the subject of a legal enquiry.

The Zurich prosecutor’s office, which at the end of March formally requested Blocher’s immunity be revoked, is interested in two incidents.

One is the meeting Blocher had on  December 3 with the bank employee and a member of the cantonal parliament, where the question is whether Blocher put pressure on them to hand him confidential papers.

The other occurred on December 27, when he is suspected of being behind the leak that enabled Weltwoche to publish screen shots of the transactions carried out by Hildebrand’s wife.

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Government seeks concession on money laundering

In response to international pressure, the government has asked parliament to approve a proposal to further dilute banking secrecy, allowing the Swiss Money Laundering Reporting Office (MROS) to pass on banking data to its partners abroad.

Switzerland was facing suspension from the Egmont Group (Keystone)

The Swiss reporting office is a member of the Egmont Group, an international association of “Financial Intelligence Units”, which since July last year has been threatening to suspend Switzerland.

The MROS, part of the Federal Police Office, is the only member of the 127-strong group that has refused to transmit financial information to fellow authorities.

The intergovernmental Financial Action Task Force, the central global organisation in the fight against money laundering and the financing of terrorism, has also hardened its tone on the issue, calling for reporting offices to be obliged to exchange all the information at their disposal.

The revision of the law proposed by the government would allow MROS to hand over concrete financial information to its foreign partners, including bank account numbers, transaction details and account balances – information currently protected by banking secrecy.

The goal is to boost the fight against money laundering and the financing of terrorism while reinforcing the integrity of the Swiss financial system, the government said.

The proposal is in the interests of the country because Switzerland would also receive information from other reporting offices, some of which are currently not giving any financial information to Switzerland, it added.

Suspicious
 
According to the Money Laundering Act, MROS is responsible for receiving and analysing suspicious activity reports in connection with money laundering and, if necessary, forwarding them to the law enforcement agencies.

The number of reports on suspicious money transactions in Switzerland received by the reporting office increased by some 40 per cent last year following the Arab Spring uprisings, MROS said in May.

Part of the reason for the increase was a new requirement for Swiss banks and other financial institutions to report shady deals surrounding foreign political events.

The total number of suspicious activity reports presented to the MROS increased from 1,159 in 2010 to 1,625 last year. The sums of money involved in 2011 were higher than in the previous two years combined. Two-thirds of reports came from banks.

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Overseas Banks Threaten to Close Accounts

Foreign banks are sending letters to U.S. residents who have accounts, requiring that these customers waive secrecy rights and pressuring them to report on the accounts to the IRS.

The banks, feeling the heat of a new law that punishes them for shielding U.S. customers, also are seeking waivers that will take them off the legal hook if something goes wrong in the future with a U.S. customer's account.

The letters typically include various documents to be signed, along with a threat to close the account if the customer doesn't comply, according to tax advisers. They say they are hearing about the letters from account holders at banks around the globe, including Switzerland, Israel and countries in Asia.

Swiss bank BSI SA, based in Zurich, for example, has sent a form authorizing account closure if needed and releasing the bank from "any and all liabilities for all the transactions that you have executed," according to a copy of the letter shown to Dow Jones Newswires. Included with the letter was an IRS Form W9, on which the customer must list their U.S. taxpayer identification number, and a form titled Declaration of U.S. Person that gives the bank authority to report information to the IRS and waives the customer's rights under Swiss bank secrecy law.

The bank didn't return a request for comment.

The letters signal a widening, and increasingly aggressive, campaign by international banks to protect themselves from U.S. official action even at the cost of losing U.S. customers. Since 2009, the IRS and U.S. Justice Department have been cracking down on offshore tax evasion, focusing first and most intently on UBS AG (UBS, UBSN.VX) and then extending to other Swiss banks and elsewhere.

Passed in 2010, the Foreign Account Tax Compliance Act, or Fatca, was designed to get more offshore assets onto the IRS's radar. Several of the law's provisions start to take effect this year and will require both U.S. citizens and foreigners living in the U.S. to report more about their overseas holdings on their tax returns.

Anyone who gets a Fatca-related letter from a bank and refuses to sign it faces a dilemma once the account is closed, says Scott D. Michel, a partner at the Washington office of law firm Caplin & Drysdale. "They have to find something to do with the money," he says, "which in this increasingly compliance-oriented global financial system usually means that one way or the other the account will come to the attention of the U.S. government."

Not everyone who has an overseas account is trying to hide assets from the IRS. Financial advisers say that, in general, clients with international connections--parents or children living overseas, for example--are worried about tripping over IRS reporting rules.

Jim Holtzman, a financial planner and certified public accountant at Legend Financial Advisors in Pittsburgh, says his clients are "jumpy" about what to do with foreign accounts.

Financial advisers and accountants have dreaded Fatca in large part because it means more, and sometimes duplicative, reporting. A taxpayer with more than $10,000 in an offshore account, for example, already must file a Report of Foreign Bank and Financial Accounts with the IRS. Now, anyone with at least $50,000 in a foreign account will have to report it separately on another form to the IRS.

Advisers who learn a client has money stashed overseas can help the person think through whether it is worthwhile to enter a special amnesty program the tax agency runs. Penalties are capped and criminal charges won't apply.

Uganda: Locals Hiding 400 Billion Shillings in Swiss Banks

Wealthy Ugandans have close to sh400b stashed away in secret Swiss bank accounts, according to a report released by the Swiss National Bank (SNB) - Switzerland's central bank.

The report places Uganda among top African countries that have millions of dollars in Swiss banks.

The total amount in Switzerland's banks stood at 1.53 trillion Swiss francs at the end of 2011, which included 154m Swiss francs (sh400b) belonging to Ugandan individuals and entities.

New Vision could not establish details of the account holders. One American dollar is equivalent to 1.049 Swiss Francs.

1.53 trillion Swiss francs at the end of 2011, which included 154m Swiss francs (sh400b) belonging to Ugandan individuals and entities. New Vision could not establish details of the account holders.

One American dollar is equivalent to 1.049 Swiss Francs.

The official figures, described by SNB as 'liabilities' of Swiss banks towards their clients from various countries, do not show the total amount of the much-debated alleged 'black money' held by Africans or other nationals in the safe havens of Switzerland.

The Swiss banks' direct liabilities towards clients from Uganda include funds held in savings and deposit accounts and assets of Ugandan individuals and corporates.

Deputy Inspector General of Government Raphael Baku yesterday said Uganda is yet to enact the Anti-Money Laundering law which would deal with transfer of ill-gotten wealth abroad.

"The problem is that we don't have an enabling law on funds illegally transferred outside the country. In the absence of the law, the banks have no obligation to report to us about the transfers," he explained.

Seychelles (sh6.6 trillion), Kenya (sh2.1 trillion), South Africa (sh2.09 trillion) and Egypt (sh2.08trillion) are the top African countries whose nationals have stashed away millions of dollars in Swiss bank accounts, according to the report.

Swiss banks are a leading destination for people, mostly criminals and dictators because of the strict security and banking secrecy policies.

Switzerland last year found 360m Swiss francs ($415.8 million) of potentially illegal assets linked to slain Libyan leader Muammar Gadaffi and his circle stashed in the Alpine country.

Some 410m Swiss francs was also traced to former Egyptian President Hosni Mubarak and 60m Swiss francs linked to former Tunisian President Zine al-Abidine Ben Ali. Swiss authorities also last year froze assets belonging to Ivory Coast's deposed President Laurent Gbagbo.

There has been global pressure for Switzerland to ask its banks to share information about their clients with foreign governments.

The UK has the largest share of money stashed in Swiss accounts, followed closely by the US according to the data.

The UK and the US are followed by West Indies, Jersey, Germany, Bahamas, Luxembourg, Panama France, Hong Kong, Cayman Islands, Japan, Singapore, Australia, Italy, Netherlands, Russia, Saudi Arabia and United Arab of Emirates.

Liechtenstein Informs Bank Clients of U.S. Tax-Evasion Request

Liechtenstein, an Alpine country of 36,000 people, has told American clients of the principality’s oldest bank that U.S. authorities have requested their account data as they widen a tax-evasion probe.

Accounts at Liechtensteinische Landesbank AG (LLB) that contained at least $500,000 at any time since the beginning of 2004 are covered by the information request, according to a May 30 letter sent to a client by the principality’s tax authority. Liechtenstein facilitated the so-called group request from the U.S. by amending a tax law in March.

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Liechtensteinische Landesbank AG headquarters in Vaduz, Liechtenstein. Photographer: Adrian Moser/Bloomberg

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The headquarters of Liechtensteinische Landesbank AG, foreground, stand below Vaduz Castle in Vaduz, Liechtenstein. Swiss banks are seeking a settlement with the U.S. as Liechtenstein’s larger Alpine neighbor, the world’s biggest center for offshore wealth, tries to shed its image as a haven for undeclared assets.

Liechtenstein’s second-biggest bank, also known as LLB, is one of 11 financial firms, including Credit Suisse Group AG (CSGN) and Julius Baer Group Ltd. (BAER), being investigated as part of a U.S. probe of offshore tax evasion. The stakes for Swiss banks were raised after the Department of Justice indicted Wegelin & Co. on Feb. 2 for allegedly helping customers hide money from the Internal Revenue Service.

“The motivation for the law is the Landesbank issue, which has accelerated the process,” said Mario Frick, a partner at Liechtenstein law firm Seeger, Frick & Partner. “For a certain period of time, it will be possible to make group requests to clean up the past and the issue of legacy assets.”

Landesbank, which had 48.1 billion Swiss francs ($50 billion) of assets under management at the end of 2011, confirmed it has received a group request via the Liechtenstein authorities, Cyrill Sele, a spokesman for the bank in Vaduz, said in an e-mailed response to questions.

Third Parties

“The ruling to extend the period of applicability back to the tax year 2001 in the administrative assistance law with the U.S. is limited to 12 months from the date it comes into force,” said Sele. It “is closely linked to the ongoing U.S. offshore voluntary disclosure program.”

Those affected by the U.S. request for information have the right to appeal, according to the letter.
In the Liechtenstein group request, U.S. authorities are also targeting lawyers, accountants, financial advisers, asset managers and those responsible for professional “asset protection,” who “conspired with a U.S. taxpayer to commit U.S. crimes or provided assistance,” according to the letter.

“It’s a sign that the U.S. is not just focused on Switzerland, but on all offshore jurisdictions with Singapore, Dubai and Hong Kong very much on the radar screen,” said Milan Patel, a partner at Zurich-based law firm Anaford AG. “This request appears to be much more expansive than the agreement with Switzerland and aims to get information on third parties.”

UBS Precedent

Swiss banks are seeking a settlement with the U.S. as Liechtenstein’s larger Alpine neighbor, the world’s biggest center for offshore wealth, tries to shed its image as a haven for undeclared assets. That may involve negotiating separate deferred prosecution agreements with U.S. authorities.

UBS AG, the biggest Swiss bank, avoided prosecution in 2009 by paying $780 million, admitting it fostered tax evasion and giving the IRS data on more than 250 accounts. It later turned over data on another 4,450 accounts. Before the UBS deferred- prosecution deal, U.S. prosecutors said the bank managed $20 billion in undeclared assets for American clients.

Landesbank declined to comment on whether the handover of account data under the group request would allow the bank to enter a deferred prosecution agreement.

Christof Buri, a spokesman for larger Liechtenstein rival LGT Group, which had 86.9 billion francs of assets under management at the end of last year, said the bank only has tax- compliant U.S. clients. The bank, owned by Liechtenstein’s princely family, declined to comment further.

Unwinding Secrecy

Liechtenstein started to unwind secrecy after data stolen from LGT was used by Germany to prosecute tax evaders in 2008. Former Deutsche Post AG (DPW) Chief Executive Officer Klaus Zumwinkel was convicted of tax evasion and received a two-year suspended prison sentence plus a penalty of 1 million euros ($1.25 million).

Under pressure from the U.S., Germany and France, Liechtenstein said in March 2009 that it would conform with tax standards set out by the Organization for Economic Cooperation and Development to avoid being blacklisted as a tax haven.

Markus Amman, a spokesman for the Liechtenstein government, and Katja Gey, who helped negotiate a tax deal for the principality with the U.K., didn’t answer calls to their mobile phones.

“It’s only a question of time, say three to five years, when this type of group request will become standard for future business,” said lawyer Frick. “Liechtenstein is a small country that has had a reputation for not cooperating in the field of tax and that’s something that has to change. We have to find new areas of business.”

To contact the reporter on this story: Dylan Griffiths in Geneva at dgriffiths1@bloomberg.net
To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net