The U.S. Department of Justice is breathing down the necks of Swiss bankers. Notwithstanding this week’s acquittal of the former number 3 executive at UBS, Raoul Weil, the Justice Department continues to prosecute both banks and bankers. The Swiss government has approved changes to Switzerland’s banking laws to allow banks to exchange information with the IRS but the Swiss Parliament says, “not so fast.” Stuck in the middle are over 100 Swiss banks and their clients.
Recently the head of Switzerland’s Federal Department of Finance, Eveline Widmer-Schlumpf wrote a private letter to address concerns raised by Swiss bank SB Saanen Bank AG. In her letter, which was leaked to the Wall Street Journal, Widmer-Schlumpf told Saanen Bank that it was on its own.
Switzerland has been under tremendous pressure because of FATCA, the Foreign Account Tax Compliance Act. FATCA mandates offshore banks to review their accounts and report those with ties to the United States or U.S. taxpayers. More recently, 80 countries have agreed to a similar global tax information exchange protocol. World pressure is on Switzerland and other so called privacy jurisdictions to be more transparent.
The Swiss government isn’t likely to prosecute any banks for violating existing secrecy laws if the violation involves cooperating with the U.S. Justice Department. The banks still have to contend with lawmakers who have yet to pass necessary implementing legislation to allow banks to comply with FATCA. The banks must also walk a fine line with customers who expect the banks to comply with Swiss law and not divulge their names.
Over 100 banks have preliminary agreed to cooperate with the US Department of Justice but last month several balked and claimed the terms of the deal were too onerous. Those banks appear to be getting no support from either the U.S. or the Swiss government.
The recent acquittal of Raoul Weil, former head of UBS bank’s wealth management division might offer some hope to senior bank officers who fear prosecution but is likely to not be a factor in whether Swiss banks cooperate with the Justice Department. Previously, Switzerland’s largest private bank, Wegelin, was forced to close its doors after pleading guilty to US tax charges.
Time is running out for U.S. taxpayers and green card holders with unreported foreign accounts. The IRS is offering a streamlined reporting program to help taxpayers comply with FATCA. Other options also exist. Do nothing, however, and you run the risk of huge IRS civil penalties that could easily exceed the historical highest balance of the account.
Need more information? Contact attorney Beth Canfield at or by telephone at (414) 223-0464. We are a boutique tax firm concentrating in FATCA and offshore reporting. All inquiries are protected by the attorney client privilege and kept in strict confidence.