Last week, Swiss private bank Wegelin admitted to allowing more than 100 US citizens to hide $1.2 billion (£0.75bn) from the Internal Revenue Service for almost 10 years.Read the rest here.
The bank accepted fines of $20 million (£12.5m) of restitution, a $22m (£13.7m) fine and $15.8m (£9.84m) more for fees and agreed to shut down its banking operation.
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As well as agreeing to pay $57.8m in fines and restitution to the US authorities, in its guilty plea one of the bank’s managing partners, Otto Bruderer, also set out why Wegelin had continued with activities that it knew were wrong.
First, he explained, the St Gallen-based bank had no branches in the US and believed it was in compliance with Swiss law. Second, he added, “such conduct was common in the Swiss banking industry.”
The appearance of this claim in a court document has alarmed Swiss bankers. With a bevy of regulators in the US probing at least 10 further Swiss banks – including Credit Suisse, Julius Baer, Zürcher Kantonal Bank (ZKB) and HSBC’s Swiss subsidiary – it raises the question of how severe the US treatment of other Swiss lenders will be.
US authorities have certainly shown no sign of flagging. Three weeks ago, they charged two bankers and one former employee of ZKB with helping US citizens hide $420m of assets from the US Internal Revenue Service. “I don’t believe it is finished yet,” says Teresa Nielsen, an analyst at Bank Vontobel, which is not itself being investigated.
Legal observers take a similar view. Wegelin’s claim about the common nature of its conduct will add fuel to the efforts of US regulators, reckons Joseph A. DiRuzzo III, a senior associate at Fuerst Ittleman David & Joseph, a US law firm.
“The US authorities will use it to at least attempt to bring down the Swiss system of bank secrecy,” he says. “This case is likely to be followed by more.”