U.S., Swiss set deal on bank accounts
Accord clears the way to finding suspected tax evaders.
A deal made final yesterday between the United States and Switzerland paves the way for a potentially historic disclosure of Swiss bank secrets: the names of thousands of Americans suspected of using secret accounts to hide money from the IRS.
Under the agreement, UBS AG - Switzerland's largest bank - is expected to turn over the names of Americans that are connected to 4,450 accounts that are currently open or have been closed.
The secret accounts at one point held as much as $18 billion, the IRS said.
"We will be receiving an unprecedented amount of information," IRS Commissioner Doug Shulman told reporters yesterday.
The settlement follows a long-running effort by the U.S. government to penetrate Swiss bank secrecy and catch tax evaders.
The U.S. government had been seeking a federal court order demanding that UBS identify the holders of 52,000 accounts. The Swiss government vowed to prevent such a disclosure, leading to weeks of negotiations.
Switzerland was fighting to preserve the reputation for privacy that has made its banking industry a global powerhouse and a pillar of the Swiss economy.
The deal includes concessions that might make it easier for Switzerland to argue that its tradition of secrecy survived the battle.
The United States, meanwhile, agreed to narrow its request. More important, the United States agreed to drop its federal lawsuit against UBS and pursue the information through a Swiss legal channel under a tax treaty between the two countries.
Switzerland has not explicitly promised to identify the holders of the 4,450 accounts, but the two sides said that is the expected result, suggesting that the new U.S. request is mainly a formality and the outcome is preordained.
Under Swiss law, the affected depositors would have the opportunity to contest the release of their names and account information. But that, too, could be a hollow exercise. Under an interpretation of U.S. law, they might be required to disclose such appeals to the Justice Department, rendering moot any attempt to remain anonymous.
In February, to avoid criminal prosecution, UBS agreed to pay the U.S. government $780 million and admitted that it schemed to defraud the United States by helping Americans hide money from the IRS. At that time, the Swiss provided the names of 200 to 300 American depositors, which shows how much further Switzerland is moving on the issue. The criteria the U.S. government used to narrow its request remain under wraps. That leaves UBS depositors guessing as to their personal risk of exposure and keeps them under pressure to seek leniency by turning themselves in to the IRS.