Swiss banks face fines for US tax dodgers

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The Independent Online

Around a hundred Swiss banks could face significant penalties under a tax accord between the US and Swiss governments that will give lenders in Switzerland an opportunity to resolve an international dispute over tax evasion by rich Americans.

The deal, which applies to second-tier Swiss banks, marks significant progress for US authorities which have been pursuing Americans whom, they allege, sought to evade their tax liabilities by resorting to the services of lenders in the country known for the secrecy of its banking system.

Under the agreement, the banks will have the opportunity to pay fines or defer prosecution over allegations of tax evasion by their US clients.

By participating in the scheme, the banks will have to declare details of their cross-border businesses.

Switzerland will encourage lenders to participate in a bid to put the long-standing dispute to rest.

The programme will not be open to the big "category 1" banks that are currently under investigation said the US Department of Justice, which forced UBS to pay nearly $800m (£517) in fines connected to allegations of helping American clients evade tax in 2009.

More recently, Switzerland's oldest bank, Wegelin & Co, established in the 1700s, said in January that it was closing after pleading guilty to helping US citizens evade taxes.

"This programme will significantly enhance the Justice Department's ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States," attorney general Eric Holder said. "In addition to strengthening our partnership with the Swiss government, the programme's requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the US treasury from across the globe."

The programme also requires banks to provide information about "other banks that transferred funds in secret accounts or that accepted funds when secret accounts", which could lead to information about banks not in the scheme. Participating lenders would also have to agree to close the accounts of individuals who do not comply with US tax-reporting norms.

The potential penalties could be steep. The Justice Department said that banks seeing a non-prosecution agreement would have to cough up fines equal to 20 per cent of the "maximum aggregate dollar value of all non-disclosed US accounts" held at the bank at the beginning of August 2008. For accounts that were opened after that date but before the end of February 2009, the fine will rise to 30 per cent. Any accounts opened after February 2009 will attract penalties of 50 per cent.

USB whistleblower

Perhaps none of the recent wave of Swiss-banking secrecy deals would have happened without Bradley Birkenfeld. He was the UBS wealth manager who blew the whistle on how people like him helped clients evade US taxes by stuffing toothpaste tubes full of diamonds, buying and moving art and jewellery and generally breaking US laws with the encouragement of his seniors. He was jailed for two and a half years before being paid $104m (£67m) by the US Internal Revenue Service in recognition for his services.