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Swiss Parliament Pushes Back On U.S. Banks Deal

Mountain Vision | June 18, 2013

This article is an excerpt from the Mountain Vision newsletter, an excellent service which we strongly recommend.

From the WSJ– The lower house of Switzerland’s parliament voted against adopting a plan for banks to step around the Alpine nation’s banking secrecy laws and hand information about their dealings with suspected American tax evaders to U.S. authorities in an attempt to reach a sweeping resolution.

The vote sends the measure back to the upper house, which approved it last week, for further debate.

The proposed plan would have many of the country’s roughly 300 banks start providing details to the U.S. Department of Justice about their past relationships with American clients and the employees who assisted those clients.

The Swiss cabinet, which announced the plan last month, cautioned Parliament to act swiftly to approve it—implying that if banks don’t come forward now, U.S. authorities may ultimately come down hard on them with indictments and heavy fines. Wegelin & Co., Switzerland’s oldest bank, was hit with a U.S. indictment last year and is now defunct.

Critics have called the plan a violation of Swiss sovereignty, which unfairly exposes local bankers, advisers and attorneys to legal prosecution in the U.S. Critics have also said the plan lacks important details on the potential size of fines for the banks that opt to participate.

Now, following a 126-67 vote in the lower house against considering the measure, it is being tossed back to the Swiss Parliament’s upper house for further consideration Wednesday. Parliament’s summer session is scheduled to end Friday. The autumn session begins Sept. 9.

About a dozen banks have already been under investigation by U.S. authorities, including Credit Suisse Group AG and Julius Baer GroupAG. Those banks have begun handing over information as part of the U.S. crackdown on American tax evasion. UBS AG, the country’s biggest bank, resolved its issues with the DOJ with a deferred prosecution agreement in 2009.

Credit Suisse has already set aside 295 million Swiss francs ($319.8 million) to deal with the U.S. tax probe. Julius Baer hasn’t made a specific provision, but analysts generally estimate the Zurich-based bank could be hit with fines ranging from 200 million francs to 500 million francs.

The proposed plan for banks to resolve their issues with the U.S. by skirting banking secrecy laws drew criticism from the largest political parties in the lower house of Parliament.

The right-wing Swiss People’s Party has railed against the measure as “blackmail” on the part of U.S. authorities pressing Swiss officials to do their bidding, while the left-leaning Social Democrats have said banks should be left to resolve their legal issues on their own.

Though they haven’t been given specific details about the fines in store for participating banks, lawmakers have estimated penalties will amount to as much as 10 billion francs.

While banks would be expected to hand over data on their business with American clients, the exact identities of U.S. account holders would remain unknown.

Swiss officials have said the country remains unable to hand over such detailed information on clients until the U.S. Senate passes a 2009 amendment to a long-standing tax treaty between the countries.

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http://goldsilverworlds.com/investing/swiss-parliament-pushes-back-on-u-s-banks-deal/