U.S. and Switzerland Deal to Reveal Clients Suspected of Tax Evasion

Swiss law makers approved a deal between Swiss and American authorities that will pave the way for Swiss banks to provide U.S. prosecutors with account information on thousands of suspected tax cheats.

The agreement grew out of a law suit by the United States against Swiss banking giant UBS to gain the identity of undisclosed private banking accounts. As a result, UBS will identify clients with such undisclosed accounts. UBS accounts at one point held more than $18 billion in assets held offshore by Americans. Moreover, the agreement opens up investigative avenues for American tax and law enforcement authorities into the accounts held by Americans at other Swiss financial institutions. Such other institutions likely to receive American inquiries are Credit Suisse and HSBC, one of the world’s largest banks, which has operations in Switzerland. Swiss banking institutions hold approximately 1/3 of the world’s $7 trillion in offshore wealth.

This may be only the first waive of inquiries. Reportedly, prosecutors are looking into banks in Hong Kong and Singapore, two increasingly popular locations for offshore banking. Leads from almost 15,000 Americans who disclosed their offshore account information in response to an IRS voluntary disclosure program has aided the investigative efforts immensely.

In 2009, UBS paid a $780 million fine to federal authorities as part of a deferred-prosecution agreement with the United States. Part of that settlement included the bank’s disclosure to investigators of the names of several hundred clients.

Any American account holder who objects to the bank providing information may contest the disclosure in Swiss courts. However, anyone making such an objection must notify the Attorney General of the United States of the objection. This fact effectively will identify the objecting person to the IRS and accomplish the same result as the bank’s disclosure.

There is a sliding criteria scale for determining disclosure. The bank will identify clients with undisclosed accounts of at least $988,000. That amount will also trigger disclosure of Americans whose funds are in the name of secret offshore sham companies. For accounts involving the submission of false documents to UBS or the IRS, the trigger amount is $247,000.

This is a far reaching agreement that fundamentally changes the nature of Switzerland’s banking secrecy laws. Moreover, the United States appears ready to take the secrecy fight to other offshore banking havens. As the world’s financial system has become more global, the United States has suffered significant tax evasion losses. The United States has the legal strength to address the hiding of assets and is making the attack a priority.

For more about the Swiss and American agreement, please see The New York Times, “Swiss Approve Deal for UBS to Reveal U.S. Clients Suspected of Tax Evasion,” June 17, 2010.

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.