Switzerland to Allow Its Banks to Sidestep Secrecy Laws

Julia Werdigier and Lynnley Browning
Wednesday, 29 May 2013 | 9:52 AM ET
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The Swiss government said on Wednesday that it would let its banks sidestep the country's secrecy laws to disclose names of clients in a move intended to help resolve a long-running dispute with the United States over tax evasion.

The decision is a turning point in what has been an escalating conflict between the two countries. Switzerland's finance minister said the move would probably enable Swiss banks to accept an offer by the United States government to hand over client details in exchange for a promise against future legal repercussions.

"It is important for us to be able to let the past be the past," Eveline Widmer-Schlumpf, the finance minister, said at a news briefing in Bern, Switzerland. She declined to give any details about the program, but said banks would have one year to decide whether to accept the American offer.

Why Switzerland Is Willing to Negotiate
Patrick Odier, chairman of the Swiss Banker's Association, talks about global banking standards as well as what makes Switzerland so attractive to international investors.

The American-Swiss dispute has involved about a dozen Swiss and Swiss-style banks that allowed tens of thousands of wealthy Americans to shelter money using offshore private banking services. These banks have been the target of American prosecutors. But until now, the Swiss government had been resisting cooperation because it prized the secrecy of its banking system, which has long made Switzerland a money haven for wealthy foreigners.

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In recent years, however, it has become increasingly obvious that the costs to Switzerland as a banking center might be higher in failing to come to an agreement with the United States, if Swiss banks continue to be the target of investigations and fines.

Ms. Widmer-Schlumpf said on Wednesday that the government would work with Parliament to quickly pass a new law that would allow Swiss banks to accept the terms of the United States disclosure program. She said the new law would make it possible for banks to take part in the program, but that it would be up to each individual bank whether to participate.

"We expect this to create the base for banks to again gain some room for maneuver so that calm can return to the sector," she said. "We are convinced that this is a good, a pragmatic solution for the banks to emerge from their past."

Ms. Widmer-Schlumpf declined to say how much banks might have to pay. But she said the Swiss government would not make any payments as part of the agreement.

American authorities have indicted dozens of Swiss bankers and their clients in recent years. A breakthrough came in 2009, after UBS, the largest Swiss bank, agreed to enter into a deferred-prosecution agreement. The bank turned over 4,450 client names and paid a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.

Other Swiss banks that have been the targets of United States inquiries include Credit Suisse, which disclosed in July 2011 that it had received a letter saying it was under a grand jury investigation; the Zurich-based Julius Bär; two cantonal, or regional, banks; the Swiss operations of HSBC Holdings; and three Israeli banks, Hapoalim, Mizrahi-Tefahot Bank and Bank Leumi.

In 2012, the Justice Department indicted Wegelin & Company, Switzerland's oldest bank. The bank pleaded guilty in January, putting it out of business, and prosecutors have said off the record in recent months that more indictments could be coming.

_ By Julia Werdigier and Lynnley Browning, The New York Times

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