GENEVA - Swiss authorities on Monday urged banks to quash their doubts and enter a U.S. voluntary disclosure program aimed at uncovering American tax evaders.
Swiss financial regulators had requested that banks decide by Monday whether they will join the first stage of the Justice Department program by applying for nonprosecution agreements by the end of 2013. Swiss Finance Minister Eveline Widmer-Schlumpf responded Monday to lawmaker complaints that the government failed to resolve the tax dispute in 2½ years of talks with U.S. authorities.
The program, open to about 300 firms that aren’t already part of a U.S. tax investigation, has already forced banks to spend millions of dollars on legal and administrative fees to analyze accounts. While the Swiss government has called the measure the best way to avoid indictments, the Justice Department said last month that other U.S. authorities may still be able to impose penalties, prompting some banks to reconsider their participation.
“Everybody’s thinking about it,” Alexander Notter, a partner at merger advisory firm CFM Partners in Zurich, said in a telephone interview. “They know if they try to hide they will go out of business, but the program itself hasn’t really been thought through. It’s a wishy-washy diktat.”
The measure should be suspended while the Swiss government requests clarification from the Justice Department, Christian Luescher, a lower house member for the Liberal Party, said in an email to Bloomberg News. Widmer-Schlumpf told lawmakers she doesn’t expect any delays in the implementation of the voluntary program, adding that banks “are encouraged” to sign up.
“The government is convinced the U.S. program allows the banks to settle the past,” she said Monday in Parliament in the Swiss capital, Bern. “We assume the banks are checking whether or not they want to participate and then we’ll see if the Justice Department is content and accepts the number” of banks participating.
Banks have been hurt as the Justice Department and Internal Revenue Service are seeking to crack down on undeclared assets abroad, prompting at least 38,000 Americans to make declarations and repatriate assets. UBS, Switzerland’s largest bank, settled in February 2009 to avoid prosecution, while private bank Wegelin & Co. shut down this year after being indicted.
U.S. client assets overseen by Swiss wealth managers have slumped more than 70 percent to about $40 billion since 2009, according to estimates by Boston Consulting Group. Some of those assets are in units registered with the Securities and Exchange Commission, with banks including Vontobel Holding and Syz & Co. Group created to attract tax-declared Americans.
The United States said in August it would negotiate nonprosecution agreements with banks that admit to breaking U.S. tax laws in exchange for information on their clients and fines escalating to as much as 50 percent of undeclared American assets.
UBS, the world’s largest wealth manager, avoided prosecution by paying $780 million, admitting it fostered tax evasion and giving the IRS data on about 4,700 accounts. Wegelin, Switzerland’s oldest bank, was forced to sell its non-U.S. client business in 2012, less than a week before being indicted. The St. Gallen, Switzerland-based bank paid and forfeited $74 million before closing its doors.
“This program is only just tolerable,” Patrick Odier, chairman of the Swiss Bankers Association, told reporters on Nov. 13 in Geneva. “The level of uncertainty linked to the program remains very high,” because of its “complexity” and the fact that the IRS hasn’t confirmed the program constitutes a “definitive solution,” he said.
Business, Pages 24 on 12/10/2013