Banks that participate are required to disclose the business they bring in from American clients. The Wall Street Journal’s Marketwatch also reported that the cooperating banks will “potentially pay fines on undeclared balances held by American customers.” This program is part of a U.S. effort to reign in the tax evasion that has accelerated since the financial crisis began five years ago.
According to Reuters, the number of smaller banks participating in the probe will be directly linked to the outcome of the pursuit against the larger banks. If the U.S. brokered deal with Switzerland is not successful as a result of very few swiss banks cooperating “it is likely to hold up settlements for the larger banks” Reuters reported.
The program is a key element in a U.S. effort to sidestep Switzerland’s bank-secrecy laws, Marketwatch explained, adding that since the Swiss banks won’t reveal names of clients the U.S. is attempting to obtain other data thought the banks to identify clients.
The program has caused some opposition from the Swiss financial sector. According to Marketwatch, the chief objection is the cost of complying, “particularly for the country’s hundreds of small and medium-size banks.”
Furthermore, there have been concerns raised about the program’s lack of specific guidance and whether information given to U.S. officials could implicate Swiss bankers or advisers who may have been unaware they could be violating U.S. laws.
According to Reuters, “The U.S. scheme, which lapses at the year-end, requires banks to hand over some previously hidden information and face penalties of up to 50 percent of assets they managed on behalf of wealthy Americans.” If the banks shun the offer, it may result in criminal prosecution.
The deal for second-tier banks, agreed in August, is part of a U.S. drive to lift the veil of Swiss bank secrecy which in 2009 led to UBS paying $780 million in a settlement where the bank agreed to hand over U.S. client names with secret Swiss accounts.
Coop, majority-owned by Basler Kantonalbank which is among the banks in the crosshairs of U.S. prosecutors, said staying out of the program was too risky.
Migros said it was coming forward following comments from the Swiss regulator, which told banks they should err on the side of caution in judging their dealings with American clients. Linth said it is entering the program in an effort to bring the matter to a swift conclusion.