Swiss Bank Secrecy no more?

February 21st, 2009

Swiss Bank account has been synonymous with the word Secret since the Middle Ages. Has it now been consigned to the history books? In a move that has amazed other Swiss bankers, and possibly horrified anyone with a bank account there, the Swiss Banking giant Union Bank of Switzerland (UBS) has handed over details of accounts to the IRS tax investigation department (the USA equivalent of HM Revenue & Customs).

UBS began negotiations with the US last year after allegations that the bank had helped about 17,000 Americans conceal about $20bn. On 18th February 2009 the Swiss bank agreed to pay $780m ($400m in tax-related payments plus $380m in forfeited profits) and give customer details to the IRS; as part of a settlement of a “deferred prosecution”, in which UBS admitted it helped thousands of clients evade (US) taxes.

The Swiss President, Hans-Rudolf Merz, admitted they had delivered the files of between 250 and 300 UBS customers/ US citizens suspected of tax fraud, to US investigators. More worryingly for any tax evaders, the agreements announced this week may not be the end of the issue. In June 2008, a US court gave the IRS permission to serve UBS with a “John Doe” summons; that would identify all US taxpayers with accounts at UBS in Switzerland. Apparently the US is seeking enforcement of that summons.

The President also made an incongruous “damage limitation” statement that: “Banking secrecy…remains intact.” But he went onto make a statement that could send a chill down the spine of anyone who has banked in Switzerland for tax “saving” reasons, saying: banking secrecy protected privacy but “does not protect tax fraudsters”. He seemed to say that the secrecy laws protected people involved in tax evasion but not tax fraud; suggesting that only the latter is a criminal activity. Maybe in Switzerland, but here in the UK the taxman doesn’t make that distinction and both tax fraud and tax evasion are considered to be criminal offences – even though investigations are usually settled for financial penalties under the Civil Investigation of Fraud procedures, rather than by prosecution.

Some experts say this shows that undeclared financial assets are no longer secret in Switzerland. This is the latest demonstration of OECD nation’s efforts to crack down on tax evasion.  “The veil of secrecy has been pulled aside and we will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so” – assistant attorney-general of the US justice department.

What does it mean here in the UK?

Given that HMRC were prepared to pay a criminal in order to get hold of Liechtenstein bank secrets, I imagine that the brains at 100 Parliament St are busy thinking up ways to get their mitts on some Swiss secrets and will be swapping tales with their American counterparts. It couldn’t be better timing for HMRC who will be hoping even more people with offshore bank accounts come forward under this year’s planned New Disclosure Opportunity – Tax Amnesty than the 40,000 who disclosed under the Offshore Disclosure Facility in 2007.

If you are worried about the tax man and your offshore bank accounts or assets, or want advice about the New Disclosure Opportunity then for an initial free and totally confidential discussion call Paul Lynam now on 0845 643 9997