This Swiss bank mailbox is not as private as once thought. / Image: pierre bedat/Flickr/CC BY
U.S. and Swiss authorities have engaged in informal talks regarding bank secrecy in Switzerland and other European countries. They are negotiating a deal for a common settlement to avoid prosecution by the U.S. under the Foreign Account Tax Compliance Act. The settlement, if reached, could be in the multibillions. Sources say that the settlement could come as early as July.
A tradition of secrecy
Banks in Switzerland are regulated by the Swiss Financial Market Supervisory Authority (FINMA). The country has a centuries-old tradition of bank secrecy, which became law under the Swiss Banking Act of 1934. Under that law, Swiss banks are not allowed to divulge the personal account information of their clients. Lebanon, Singapore and Luxembourg have similar policies.
The practice of bank secrecy has often been accused of enabling underground economies and organized crime. Rudolf M. Elmer, a former Swiss bank employee, has testified that Swiss bank secrecy “is a global problem.” He went on to say that, “offshore tax evasion is the biggest theft among societies and neighbor states in this world.”
UBS paid out millions in 2009
In 2009 UBS, a prominent Swiss financial institution headquartered in Zurich, paid the U.S. $780 million to avoid tax evasion prosecution. The financial records of 4,450 American UBS clients were handed over to Washington, effectively puncturing the laws protecting Swiss bank secrecy. Similar probes have come from Germany, Italy and Britain, all of whom suspect their citizens of using Swiss accounts to evade taxation.
FACTA adopted in 2010
The Foreign Account Tax Compliance Act was adopted by the U.S. in March of 2010 to prevent Americans from evading taxes by hiding assets in off-shore bank accounts. The FACTA forces non-U.S. banks to disclose information regarding accounts held by citizens of the U.S.
July settlement unconfirmed
Mario Tuor, a spokesman for the State Secretariat for International Financial Matters, said that talks had been under way, but he would make no confirmation regarding a possible July resolution.
