Date: 08/22/12

Topic: Foreign Accounts

After the prominent litigation with Switzerland’s flagship bank UBS, the United States is investigating eleven other Swiss banks for aiding U.S. citizens suspected of dodging taxes. The United States has submitted new requests for information concerning former clients of Credit Suisse and others suspected of cheating on their U.S. taxes.

To make the investigations go away, Switzerland is offering pay fines and divulge U.S. client names in order to protect some 300 or more banks from U.S. prosecution. The negotiation has not been ratified by the United States but the terms suggest Switzerland would assist U.S. taxing authorities in instances of both tax evasion and tax fraud. Switzerland is one of a few countries to draw a distinction between tax fraud, which is illegal, and tax evasion, which is not. The deal marks a departure from this traditional dichotomy and indicates that tax evaders will eventually be detected.

Switzerland is eager to see this conflict resolved after having been locked in negotiations for years. Switzerland’s Finance Minister, Eveline Widmer-Schlumpf, has said she wants to close negotiations and settle this longstanding tax dispute before the U.S. elections in November. Recall that in 2009 the Swiss agreed to pay a fine of 780 million to avoid criminal charges from being levied against UBS. In addition it disclosed details about 4,450 clients.

At least five banks have turned over thousands of employee names to U.S. authorities to aid in attempts to track down persons with untaxed money held in Swiss accounts in order to secure leniency for their alleged role in helping American clients evade taxes. In February the Swiss Parliament approved a plan that would allow U.S. officials to request information on suspected tax evaders based solely on their behavior rather than the name or number appearing on the bank account.