Why U.S. Tax Evaders Can No Longer Count on Swiss Secrecy R

[frigidmagi]

Time

Switzerland's oldest private bank, Wegelin & Co., had survived three centuries of upheaval on the continent, including Napoleon's invasion of the country and two World Wars. But its illustrious history was brought to an end last month by an unlikely source: a U.S. government desperate to track down tax evaders.

In early February, in a move that rattled Switzerland's financial industry, the U.S. Department of Justice indicted Wegelin on charges of helping wealthy Americans hide $1.2 billion from U.S. tax authorities. As the first foreign bank in history to be indicted by the U.S. government, the ruined Wegelin was quickly sold to a former rival, Raiffeisen Group. But the Obama Administration was just getting started — it also ramped up the pressure on 11 more Swiss financial institutions to hand over their American clients' names. Now it looks like U.S. authorities might get their wish.
(MORE: The Swiss Question Their Once Proud Banks)

On March 4, the Swiss parliament approved an amendment to the country's existing tax accord with the U.S., which, when ratified by the U.S. Senate, will give the American government unprecedented access to accounts held by its citizens in Switzerland. While the existing agreement has long allowed the release of tax information in cases of proven wrongdoing, various stumbling blocks, like different interpretations of tax evasion under Swiss and American laws, often slowed or even halted the process. (Evasion is a civil, not a criminal, offense in Switzerland.)

The amended treaty will now allow U.S. authorities to identify American tax evaders who exhibit certain "behavioral patterns" more easily. That includes stashing undeclared money in banks, "dummy" corporations, trusts and foundations created specifically to hide these assets. The new treaty will also allow U.S. authorities to request information from foreign banks that don't do business on American soil but have U.S. clients. Banks and account holders who are found to be hiding undeclared U.S. assets will be forced to pay a substantial fine to the American government.
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"This is a strike at the heart of the Swiss banking sector and a major breakthrough for the U.S.," says Teodoro Cocca, an adjunct professor at the Swiss Finance Institute, a private foundation created by Switzerland's banking and finance community in cooperation with leading Swiss universities. Cocca warns that the pressure on Switzerland, which has long prided itself on its banking-secrecy rules, will now increase dramatically if other countries "also demand the same exchange of information rights."

The U.S. Department of Justice has been tightening its grip on Switzerland since 2008, when an investigation revealed that the country's biggest bank, UBS, helped rich Americans hide billions in undisclosed offshore accounts. To avoid criminal charges, UBS paid a $780 million fine and released the names of 250 clients suspected of tax evasion.
(MORE: Can UBS Bounce Back from the Rogue-Trader Scandal?)

Both the Swiss government and Swiss Bankers Association welcomed the new treaty, hoping it will finally end the long-running tax dispute with the U.S. But not everyone in Switzerland is happy about it. The right-wing Swiss People's Party (SVP) argues that the agreement is a breach of constitutional privacy rights and a brazen attempt by a cash-strapped U.S. government eager to fill its coffers with tax revenue. "Americans disregard rights of others just to be able to pay off their huge debt," the party claims on its website, adding that American authorities are "hypocrites" for pressuring Swiss banks while thousands of "dummy" companies set up in Delaware are helping U.S. corporations evade taxes in their own country.

Switzerland is the world's largest offshore-banking center, with $2.1 trillion in foreign money under management, but the Swiss believe their country's reputation as a haven for illicit funds is unjustified. Legislation passed in 1998 made money laundering illegal, while other laws require that any suspicious deposits be reported to the authorities. Last year, another new law was passed allowing the government to confiscate funds deposited in Switzerland by plundering dictators and return the money to the country of origin. And numbered anonymous Swiss bank accounts are a myth — the law requires that all financial institutions identify their customers and ensure that deposits come from legitimate sources.

Some Swiss banks worry that the new treaty will make the country's financial sector less attractive to overseas clients. But experts say this is an unlikely scenario. "The future competitiveness of Swiss banks doesn't depend solely on secrecy," says Stéphane Garelli, an economist and director of the World Competitiveness Center at the International Institute for Management Development in Lausanne. "Switzerland offers other advantages — a stable democracy with transparent arbitration and justice procedures — which may not be the case of certain emerging competitors, especially in Asia." Martin Naville, head of the Zurich-based Swiss-American Chamber of Commerce, agrees. He says Swiss banks still offer "more discretion, professionalism and security, within tax compliant and legal bounds, than financial institutions in many other countries."
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While the long-term impact of the new treaty remains unknown, the U.S. government has made at least a couple things clear: Swiss banks will have to change the ways they operate if they want to stay on Washington's good side, and Americans hoping to hide their wealth in Switzerland can certainly no longer bank on secrecy.

Can't say I'm all that upset about this.

[LadyTevar]

I do have to admit that this does sound like a step forward.

[Dark Silver]

I'm ok with this.....

No more easy to hide in Swiss Bank Accounts.

Besides, everyone knows the place to hide your millions is in a offshore bank account in some country with no extridition treaty hidden behind several Cayman Island Shell-Corps

[Josh]

Besides, everyone knows the place to hide your millions is in a offshore bank account in some country with no extridition treaty hidden behind several Cayman Island Shell-Corps

It's great until you forget your fucking number...


So I've heard.

[Dark Silver]

Indeed.

You gotta plan for those eventualities sir.

[Josh]

Indeed.

You gotta plan for those eventualities sir.

I had it written on my hand, but then Thursday rolled around and, y'know, that's shower day.

[B4UTRUST]

Indeed.

You gotta plan for those eventualities sir.

I had it written on my hand, but then Thursday rolled around and, y'know, that's shower day.

Christ, fucking amateurs. Everyone knows you write them on post-it notes and put them on your computer monitor next to your passwords. Jesus, guys, come on!

[Josh]

Indeed.

You gotta plan for those eventualities sir.

I had it written on my hand, but then Thursday rolled around and, y'know, that's shower day.

Christ, fucking amateurs. Everyone knows you write them on post-it notes and put them on your computer monitor next to your passwords. Jesus, guys, come on!

I just use the generic impenetrable password of 1234qwer!@#$QWER

I've been told that's completely unbreakable.