The U.S. has been using the weakness of the UBS banking franchise to shake down the organization for the names of American clients suspected of using the bank to dodge taxes in the United States. As far as the Swiss government is concerned, this would set a bad precedent in the Swiss banking community where Swiss banking secrecy is part and parcel of the attractiveness to foreign clients. As a result, the government has moved to prevent UBS from handing over names to the IRS.
The Swiss government is arguing that handing over the client details would breach its national bank secrecy rules.
UBS is refusing to release data on 52,000 Americans that hold Swiss bank accounts to US tax authorities who accuse them of tax evasion.
Switzerland’s largest bank, UBS faces a court hearing in Miami on 13 July.
In a case brought under civil law, it stands accused by the US of hiding close to $15bn (£9.33bn) in assets in secret accounts.
Back in February, UBS did hand over the details of 250 US clients to American authorities to avoid a criminal case, but it is continuing to refuse to pass on data on the further 52,000.
Back on the first of the month, included in the daily links was an article in the Swiss daily Le Temps, which indicated the precedent set by UBS with the U.S. tax authorities was furthering the passing of data by Credit Suisse to French tax authorities. Clearly, as the economy has faltered, governments are looking to maximize revenue and are cracking down on suspected cases of tax evasion. Below is my translation of the publicly available bits of the French-language article on Credit Suisse:
Fearing retaliation, the [Credit Suisse] group is requiring its customers allow it to transmit their identity to the French tax authorities. The measure applies to all holders of French-traded securities.
Fifteen days after the signing of a new tax treaty between Switzerland and France on 11 June, Credit Suisse is taking unusual steps to avoid falling into the focus of the French tax authorities. Fearing new prosecutions of customers not reporting.. the bank plans to close the accounts of customers who do not have the ‘smell of holiness’ with the French tax authorities.
Clearly, things are getting out of hand as far as the Swiss government is concerned because Switzerland is losing its status among wealthy private clients. In fact, Bank of America, through its acquisition of Merrill Lynch, recently dethroned UBS as the top dog in Private Banking. UBS has been shrinking in share due to its financial woes and the uncertainty about bank secrecy. This is why the Swiss are fighting back now.
I should also point out that the Germans are getting in on the more aggressive policing of tax dodging. It seems as if everyone is using this economic crisis to try and pry open Swiss banking secrecy laws. The 13 July hearing in Miami regarding UBS is the next important date in this effort.