Banking Secrecy Continues to Fade, Americans With Offshore Accounts Must Take Protective Action
Americans with undisclosed accounts in Switzerland have more reason to be concerned: Swiss banks are likely to settle US investigations of offshore tax evasion by paying billions of dollars and revealing the names of Americans with Swiss bank accounts. The settlement may be presented to the Swiss Parliament as soon as November 10. As many as ten thousand accounts may be disclosed to the IRS.
Facing criminal tax fraud investigations against multiple Swiss banks, the Swiss are eager for a general settlement with US authorities over allegations that Swiss banks assisted Americans to hide income from the IRS in Swiss accounts. Beginning with criminal charges against UBS in 2008, the US Department of Justice has expanded its investigation to include Credit Suisse, Bank Julius Baer, Wegelin & Co and the Kantonal Banks. Rather than dealing with the charges individually, bank-by-bank, the Swiss are eager for a global settlement that would end the investigations en mass. We wrote previously that a global settlement was under negotiation.
It appears that settlement negotiations are back on track, and that the Swiss banks under investigation will disclose banking information to the IRS regarding Americans with Swiss accounts.
We can conclude the following from this latest news:
- Swiss banking secrecy, as a matter of institutional culture and Swiss national law, continues to wither away. Swiss banking secrecy, codified in Swiss law and upheld for decades, is now in tatters. UBS has revealed account details of thousands of US clients, and other banks will likely soon follow suit. The erosion of Swiss banking secrecy has been approved by the Swiss Parliament and the highest Swiss court. While Swiss bank accounts are still confidential vis-a-vis private, civil creditors and litigants, there is no more banking secrecy vis-a-vis governmental tax authorities.
- Swiss banks have, and will continue to cooperate with IRS investigations of US citizens with Swiss accounts. UBS gave up client secrets, and now Credit Suisse and other Swiss banks under investigation will also do so, in order to end the continuing investigations and move on. As a business decision, it appears that the Swiss banks have concluded that it is better to reveal client secrets than continue to be the targets of governmental investigations and legal action.
- If you are a US taxpayer with a Swiss account, and have been waiting on the sidelines to see what the Swiss banks will do, the lesson should be clear: your Swiss bank will give up your banking information. You will not be protected under Swiss law. Your bank will deliver your data to the IRS as a matter of self-preservation.
- Clearly, the IRS is not stopping with UBS, or even Credit Suisse, but will continue investigating banks of all sizes. The IRS and DOJ are also investigating banks in India, Israel, and Liechtenstein. There is no reason to think that the IRS will stop at these countries. All of the former tax havens – Jersey, Guernsey, Cayman, Isle of Man, Monaco, etc. – are “on the radar”. All the former tax havens have signed Tax Information Exchange (TIE) Agreements. Non-compliant accounts around the world are vulnerable to discovery.If even the Swiss – traditional stalwarts of banking secrecy – “caved”, then you can expect any bank in any country to release data to the US.If you are a US taxpayer with a non-compliant foreign account, we urge you to read our discussion on the strategies available to you, in light of the erosion of offshore banking secrecy and the continued IRS offensive on non-compliant offshore accounts.