IRS cracks open 4,450 Swiss bank accounts
Deal with Swiss banking giant UBS gives access to secret accounts of Americans evading tax authorities.
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Bruce Zagaris, a tax lawyer who represents several UBS clients, said the Swiss reputation for secrecy has "absolutely" been tarnished. Mr. Zagaris said that the Swiss prize their ability to protect customers from the prying eyes of other governments but that this situation has shown that, when faced with legal action, the Swiss, will give up select information.Skip to next paragraph
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"There are a number of public policy issues having to do with the role of different financial service jurisdictions," he said. "The Swiss have to balance their policy of confidentiality on the one hand with law enforcement cooperation" with foreign governments attempting to enforce their tax laws.
Zagaris added that, because of the IRS and Justice Department's aggressive and successful handling of UBS, all Swiss banks are likely to face greater scrutiny.
This is not the first time that Switzerland has pulled back the secrecy veil. In the 1990s, the Swiss passed laws on money laundering that exposed the dictators and criminals who relied on Swiss banks to avoid scrutiny.
The decision also poses problems for Americans living in Switzerland. According to American expatriates there, Swiss banks are shying away from US clients because of the scrutiny they attract.
"There are a lot of normal Americans with investment and checking accounts," in Switzerland, says Mary Louise Serrato, an American living in Zurich, who serves as executive director of American Citizens Abroad. "Not everyone is a tax evader (but) banks in Switzerland don't want to touch any Americans anymore because they don't want to be investigated. Its causing havoc."
Americans need not apply
Ellen Wallace, an American in Switzerland who runs the English language information site GenevaLunch.com, said the IRS has been increasing pressure on Swiss banks to disclose information about American clients for years. In response, Swiss banks have made even the most basic transactions, like opening a checking account, paying a mortgage, or buying a security, onerous for Americans, Ms. Wallace says.
"You get into remarkably complicated situations in which [US expatriates] can't make those transactions happen in a straightforward way," she says.
Migros Bank and Raiffeisen Bank, both based in Switzerland, recently adopted rules that make it nearly impossible for US citizens based in the United States to open an account and very difficult for US citizens based in Switzerland to do so.
Wallace acknowledged that some US citizens living in Switzerland owe back taxes to the IRS. However, she said that many who do follow both US and Swiss laws are now suffering because of the perception that every US citizen is hiding assets.
"It's easy to distort the picture and say the 52,000 names that are wanted by the IRS are 52,000 crooks," Wallace said, referring to reports last week that 52,000 names would be handed over by UBS. "They're not all evil people trying to hide their money. It's somewhere in between."
Related column: A tougher stance on tax havens
Backgrounder: UBS deal cracks door on banking secrecy worldwide