Swiss-US deal lifts cloak on tax cheats

Banks that helped Americans evade payment will be forced to give details of account holders, and to pay penalties expected to exceed US$1b

PUBLISHED : Friday, 30 August, 2013, 12:00am
UPDATED : Friday, 30 August, 2013, 8:27am


Switzerland and the US are close to announcing an agreement that could expose Americans who have used Swiss banks to avoid paying taxes.

The deal will also end a long dispute over how to punish the banks involved, with penalties expected to run to more than US$1 billion.

Swiss Federal Finance Department spokeswoman Anne Cisard said it would be "a matter of days" before the two governments issued a joint statement.

A senior US Justice Department official said on condition of anonymity that banks that had helped Americans evade taxes would have to hand over information on account holders.

They would also be required to admit wrongdoing and pay penalties in exchange for deferred prosecution deals.

The penalty provisions would start at 20 per cent of the value of accounts starting in 2008, said the official. The penalties would increase for accounts opened after the Swiss bank UBS reached a deferred prosecution agreement in 2009, she added.

Another person briefed on the matter said the penalties could rise to as much as 50 per cent of the value of the banks' undeclared US accounts. The total penalties, the Justice Department official added, would probably be "in the hundreds of millions, exceeding a billion dollars".

US officials will also gain access to information about transfers out of Swiss accounts by Americans who were alarmed by the UBS deal. The official said it was hoped this would encourage additional tax evaders to take advantage of a voluntary disclosure programme conducted by the US Internal Revenue Service.

That programme has already netted more than US$5 billion, with 38,000 tax evaders coming clean with the government.

The official said that 14 Swiss banks under investigation by the US would not be eligible to participate in the new deal.

But they would benefit by having a framework for turning over information. The official declined to identify the banks.

One Swiss bank, Zurich Cantonal Bank, confirmed on Wednesday that the impending settlement covered only those Swiss banks not under formal investigation by US authorities.

The banks, including Zurich Cantonal, that are under investigation are co-operating directly with the Justice Department, Igor Moser, a bank spokesman, said.

He added that his bank welcomed the agreement "because it is a precondition for Zurich Cantonal Bank to enter into negotiations" for a deferred prosecution agreement.

Sindy Schmiegel Werner, a spokeswoman for the Swiss Bankers' Association, said: "The banks are backing the programme. It's a painful thing, but it is the most acceptable solution among a number of unacceptable solutions."

Switzerland, home to accounts with more than US$2 trillion in overseas deposits, has been in dispute with Washington since 2009. That was when UBS, the largest Swiss bank, agreed to pay a US$780 million fine and to hand over information on 4,450 accounts to resolve accusations that it had helped wealthy US clients avoid taxes.

When the Swiss rejected US demands for information from additional banks, Washington began criminal investigations into more institutions, including Credit Suisse and Julius Baer.

In February last year the US indicted Wegelin & Co, the oldest Swiss bank, putting it out of business.

A previous attempt by the Swiss government to arrange a deal failed in June, amid concerns about privacy and complaints that the agreement was being negotiated in secret.

Legislators then called for an executive-level agreement with Washington.

A deal would not mean an end to Swiss banking secrecy because it would affect only the accounts of Americans, but it would represent a continuing erosion of the once-ironclad Swiss guarantee that banking information was sacrosanct.

Switzerland is working separately on a tax deal with the EU, of which it is not a member.