Swiss banks to divulge names of wealthy US tax avoiders, pay billions in fines

About a hundred Swiss banks will avoid prosecution by divulging the names of US clients who have allegedly avoided tax by using secret accounts. The banks could face fines of up to 50 percent of the asset value if they provide full disclosure.

The settlement will apply to second-tier Swiss banks and will be open to banks not already under a US criminal investigation. This rules out the second-largest Swiss bank, Credit Suisse; the largest European bank HSBC Holdings Plc and Julius Baer Group Ltd, as well as several regional banks.

Under the deal, each bank will set its own non-prosecution or deferred-prosecution agreement with the US authorities. “The program is intended to enable every Swiss bank that is not already under criminal investigation to find a path to resolution,” the US Department of Justice said in a statement.

The fines are set to reach up to 50 percent of the aggregate value of any undeclared accounts held by wealthy Americans, depending on the time the accounts were opened. To decide whether they can afford paying billions of dollars in fines and participate in the deal, Swiss banks will have to assess the cost of potential penalties versus the risk of US prosecution.

“It’s a choice between two evils,” a tax lawyer with Poledna Boss Kurer AG in Zurich, Walter Boss, told Reuters. If they don’t cooperate with the US, the US might indict them,” he stated.

It’s hoped the breakthrough agreement with the world’s largest off-shore financial center with about $2.2 trillion of assets will boost the US campaign against tax evasion by citizens hiding their funds abroad. It means, Switzerland will finally cease to be a “secret banking heaven” for Americans out of reach of US tax authorities.

“This program will significantly enhance the Justice Department’s ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States,” US Attorney General Eric Holder said in a statement.

“In addition to strengthening our partnership with the Swiss government, the program’s requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the US Treasury from across the globe,” he added.  

Some unidentified Swiss banks who are not cooperating with the US justice system, could face punishment, the Attorney General has warned, saying that the agreement creates “significant risks for individuals and banks that continue to fail to cooperate, including for those Swiss banks that facilitated US tax evasion but fail to cooperate now, for all US taxpayers who think that they can continue to hide income and assets in offshore banks, and for those advisors and others who facilitated these crimes.”

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