Authored by: Scott A. Harty
The U.S. government continues to levy immense pressure on the Swiss banking system, and the Swiss banks, historically renowned for their secrecy, continue to show cracks. On January 30, 2012, eight Swiss banks acquiesced to intensified pressure from the U.S. and handed over data on many U.S. clients suspected of tax evasion. The data includes millions of emails between various bankers and their clients (and, by necessity, the names of those parties involved). While the data was handed over to avoid potential prosecution by the U.S. government, the data was provided in a heavily encrypted format. The encryption key will be retained by the Swiss until a broader settlement is reached relating to information exchanges.
Martin Naville, CEO of the Swiss-American Chamber of Commerce in Zurich, said that the data was provided as a show of goodwill and a willingness to pursue negotiations in good faith. Focusing on the negotiations, Mr. Naville highlighted the fact that each side must give a little ground for the negotiations to be successful, and this data was an accession by the Swiss government and banking industry.
With the recent sale of Switzerland’s oldest bank, Wegelin & Co., and the corresponding indictment of 3 of its employees, the ripple effects of U.S. efforts is evident. Other Swiss banks appear anxious to reach a final agreement, avoid further investigation and potential prosecution by U.S. officials, and retain some of Switzerland’s coveted reputation for banking privacy. The deal that is currently being negotiated involves 11 Swiss banks (including Julius Baer, Credit Suisse, HSBC Switzerland, and Basler Kantonalbank), imposes heavy fines (although the exact amounts are unknown, UBS paid nearly $800 million in their 2009 deal), and requires disclosure of certain U.S. client data.
If you have any questions concerning these and other related matters, please contact Scott Harty in SGR’s tax group.