The Swiss Bank Affair

I have been following the Union Bank of Switzerland affair with great interest. From news reports, it appears that the US Government (IRS) has been able to obtain the cooperation of the Union Bank of Switzerland in obtaining the accounts of a couple of hundred Americans who may have hidden their assets in that county without reporting them. Efforts are under way to obtain the accounts of another 52,000 or so Americans who have Swiss bank accounts.

Aside from the issue of who these Americans are and are any of them names we know, it is an interesting legal issue from the Swiss point of view. As is well known, Swiss bank secrecy is a national institution, one that has contributed greatly to the wealth of that nation. The Swiss laws regarding bank secrecy are strict. Bank officials who violate those laws are subject to harsh criminal penalties in Switzerland. Indeed, as we speak, Swiss courts are in the process of determining the legality of UBS releasing the 52,000 accounts in question.

One issue that seems to be in question is whether Americans who hold Swiss Bank accounts are engaged in tax fraud or merely tax evasion by hiding their wealth. If it is a case of mere tax evasion, the Swiss will not cooperate with foreign governments.

During the decade of the 1980s, when I was stationed with DEA in Milan, Italy, I had occasion to work often with the Swiss police and made several trips to that country. It was during that era when the US Department of Justice, Dept. of State, FBI and DEA were making great inroads into obtaining Swiss government/police cooperation into the investigation of monies placed into Swiss bank accounts that were derived from drug proceeds. As a general rule, the Swiss began to cooperate with other governments when bank funds could be shown to be derived from drug trafficking-or other criminal activity -but not mere tax evasion. In those cases where proof could be provided to Swiss authorities, they would block the account and seize the funds. The money would not be repatriated to the originating country, but kept by the Swiss government. (I must admit that I am not up-to-date on the current policy having been retired for 14 years. I assume it is pretty much the same.)

How this plays out will be interesting especially if the Swiss Government winds up dumping 52,000 accounts on the IRS. I wonder what big fish will fall out of the net?