The Swiss government will consider ways to allow the country’s banks to hand over information to U.S. authorities after parliament blocked the bill that would have allowed the banks to dissolve secrecy laws. The lower house voted two-to-one against the bill, even though the upper house had backed it. The bill is the result of continued pressures from the US to help stop Americans from evading their taxes. The US had demanded action by July 1 and the government is under pressure to find a way to save its banks from criminal charges for assisting in tax evasion. The Swiss government warned that without the law, banks may be sued by US authorities.
Finance Minister Eveline Widmer-Schlumpf said the government would do everything in its power but its options were limited without the bill. The government could consider issuing an executive order to allow banks to comply with US demands but the ministry is still working on the plans. They will present new proposals to the cabinet at its scheduled meeting on June 26 or a week after. The order will comply with existing Swiss laws and is likely to refer to guidelines prepared by Swiss financial markets regulator FINMA, which lay out rules for bank dealings with foreign authorities. There is a chance that banks could face legal opposition from employees but this opposition should be limited because such cases are costly to fight and Switzerland does not allow class action lawsuits by groups of plaintiffs.
The protection of client information has helped make Switzerland the world’s biggest offshore financial centre, with an estimated two trillion dollars in assets kept there. But this has come under major target by countries like Germany, France, and the US. US authorities have more than a dozen banks under formal investigation, including Credit Suisse, Julius Baer, and the Swiss arm of Britain’s HSBC. Switzerland’s oldest private bank, Wegelin, announced they were closing earlier this year after admitting to helping American clients evade taxes. Markets also reflect such concerns as shares in several Swiss cantonal banks slid on Thursday. Investigation by the US has also caused a decrease in the reputation of Switzerland’s financial centre. Because they are now under constant investigation and under the radar of the US, it has become harder to attract business and are at risk of being challenged by rivals such as Singapore. Swiss National Bank Chairman Thomas Jordan highly recommends that Switzerland take all measures to avoid more banks being indicted and the Swiss Bankers Association warns that there will be huge costs to the economy if the government fails to find a way for banks to meet the requirements of the US.
Los Angeles tax attorney, Vic Abajian, confirms that it is just a matter of time before the U.S. gets information on U.S. account holders. It is now more critical than ever to review your options and quickly determine whether participation in the 2012 OVDP is warranted. Once the Swiss turn over your name, you are no longer immune from criminal prosecution. Even worse, once the government gets your information, the 5th amendment does not apply and you will be facing possible jail time and loss of almost the entire foreign account balance. Mr. Abajian, is an FBAR attorney located in Los Angeles and currently represents several taxpayers that are in the process of responding to criminal grand jury subpoenas.