A Clash of Mammoth Proportions: In One Corner, Switzerland’s Tradition of Bank Secrecy… The Other, FATCA

While the Swiss banking system’s reputation for hiding numbered bank accounts under a cloak of anonymity was once considered sacrosanct, the seal was broken on its banking secrecy back in 2013 when it signed an international agreement with the OECD (Organization for Economic Cooperation and Development) to fight tax evasion. Since then, other international agreements, such as the FATCA, have continued to chip away at the remaining vestiges of bank secrecy deeply ingrained within Swiss culture.

Have these agreements marked the end of bank secrecy in Switzerland? Not necessarily, according to a recent article appearing in the New York Times. The article, entitled Swiss Banks’ Tradition of Secrecy Clashes With Quests Abroad for Disclosure, here, examines the fallout to Swiss bankers who have implemented these anti-tax evasion policies.

The following is a summary. Switzerland signed an international agreement to share financial information with dozens of other countries, the purpose of which is to pull the curtain back on wealthy clients with undisclosed foreign bank accounts. As part of this treaty, Swiss banks are expected to hand over the names of hundreds of their employees to the United States Department of Justice in exchange for immunity from prosecution.

Even as the Swiss authorities have outwardly given a firm nod of approval to FATCA, at home laws on the books since 1934 make violating client confidentiality a crime and require bankers to guard secrecy like priests or lawyers.

Midlevel bankers are the ones who have been caught within the crosshairs. Very simply, they’re damned if they help either side. If they cooperate with foreign officials and violate their “duty of absolute silence,” as it is known in Switzerland, they face a parade of horribles: from home raids, prison, fines for secrecy violations and industrial espionage to stigmatization by colleagues and friends.

As a result, those bankers “being pressured to reveal their secrets or those of their clients to American and other foreign authorities investigating tax evasion and other crimes are maintaining their code of silence. For those bankers whose roles have brought legal charges abroad or the threat of them, that means avoiding extradition by staying within Switzerland, living life in legal and personal limbo.”

Making matters worse for these mid-level bankers is the fact that they have been forced to take the weight for their superiors.

Against this backdrop, it is no wonder that “a backlash is building to protect the vaunted traditions of secrecy that undergird an essential pillar of the Swiss economy.” That backlash has been spearheaded by the right-wing Swiss People’s Party, which “has gathered 80 percent of the 100,000 signatures required for a voter referendum in coming months to enshrine corporate secrecy in the Constitution.”

According to Daniela Fluckiger, a spokeswoman for the trade group, the Swiss Bankers Association, “Swiss banks manage more than $6 trillion in assets, more than half of it from abroad and a figure that has remained relatively stable even through the economic crisis and pressures from governments abroad for greater transparency of depositors.”

To date, the United States Department of Justice has been proactively targeting Swiss bankers and financial advisers who engage in unscrupulous practices. Indeed, it has charged more than 35 Swiss bankers and 25 financial advisers with misconduct for facilitating tax evasion. Six have been convicted or pleaded guilty.

Raoul Weil, the former head of UBS’s global wealth-management business, might be the next casualty as he awaits trial under house arrest in central New Jersey.

Now bank employees are bracing for the next wave of Swiss banks to turn over the names and accountholder information of U.S. persons with undisclosed accounts to the United States government. That wave is expected to net the names and accountholder information of 1,000 U.S. persons. According to the U.S. Justice Department, those names will be used to investigate Americans who evaded taxes along with the banks, bankers, and advisers.

“We are going to look very carefully that employees don’t have to pay for the strategies of their bosses,” said Denise Chervet, a spokeswoman for the Swiss Bank Employees Association. “It’s unbelievable now that some of the top executives claim they didn’t know.”

In the last few years, numerous bankers have been confronted with the stark choice of whether to break the code of absolute silence. According to the article, none of them have cracked.

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Original Post By: Michael DeBlis

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.

   

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