Swiss Banks are known for their secrecy, for decades they have helped protect secrets and in modern times become a safe heaven for corrupt people to hide their money from the governments. Now the US Government is working hard to make sure nobody stacks any more secret cash, no more tax evaders.
Switzerland’s oldest private bank, Wegelin & Co., which survived Napoleon and two world wars couldn’t really handle US’s pressure. After the US Department of Justice indicted the bank on charges of helping Americas hide over $1.2 Billion from US tax authorities, it was sold to it’s rival, Raiffeisen Group. This was the first time in history a bank has been indicted on such charges.
But it is not just Wegelin that is facing the heat, US is after every bank that promotes secrecy.
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.
“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.”
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.
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.
Looks like US is not comfortable with anyone having secrets except itself.