The world’s center of gravity has gravitated out from Europe in the last century. How could it be otherwise, after two catastrophic wars left most of the Continent’s nations in ruin?
Yet when it comes to offshore bank accounts, a relatively small European nation continues to wield outsize influence. Switzerland, with its deep-seated neutrality policy, was spared the destruction of the world wars. And with its deep-seated banking privacy protections, it became a storied center for offshore bank accounts for wealthy people from around the world.
But as we discussed in our July 12 post, Swiss banking privacy is under unprecedented pressure from the U.S. crackdown on suspected tax evasion through offshore accounts.
This story has been unfolding for several years. The historic banking secrecy laws have begun to buckle as U.S. tax authorities seek information about U.S. taxpayers who may have improperly sheltered money from taxation through undisclosed Swiss accounts.
The Swiss have already lost some significant skirmishes. A huge Swiss bank, UBS AG, the Goliath of the industy, was forced to admit it had facilitated tax evasion by U.S. taxpayers and made to pay a $780 million fine. The oldest Swiss bank, Wegelin, pleaded guilty to tax charges before going out of business. And many other Swiss banks are under investigation by U.S. authorities.
The U.S. and Swiss governments have been negotiating, however, seeking to resolve the tension between banking privacy and offshore account compliance laws. The goal is to set out guidelines to bring the Swiss into a new era of offshore account enforcement in which they can get closure on the past and avoid further prosecutions.
This closure will likely come, though, through disclosure by Swiss banks of information about their account holders that would once have been inconceivable. We will provide further discussion of this expected agreement, and its relationship to the Foreign Account Tax Compliance Act (FATCA), as the story develops.
Source: Wall Street Journal, “Justice Department, Switzerland in Bank Settlement Talks,” Laura Saunders and John Letzing, August 28, 2013