The Swiss government is working to “restore stability” to the Swiss banking industry after the country’s oldest bank closed its doors after admitting to helping Americans evade taxes which resulted in a fine of nearly US $58 million. To date over a dozen banks have offered to plead guilty with a fine to avoid prosecution.
Global mobility managers and/or corporations should be aware of the banking situation in Switzerland in case they are contacted by their expatriates who claim their accounts have been frozen. The majority of banks will request the expatriates to reopen an account or transfer to a new account with a bank that is willing to service these individuals who have ties to the US by following new SEC guidelines now in place.
When the Internal Revenue Service (IRS) went after banks in 2009 it resulted in Switzerland’s largest bank, UBS, entering into a deferred prosecution agreement agreeing to pay US $780 million in fines and penalties. There will be a huge distinction in how prosecution is handled for the banks who continued aiding Americans after being forewarned in 2009. The investigation is focusing on 13 banks suspected of abetting tax evasion, but in the end up to 80 plus financial institutions could face criminal charges.
Companies with employee relocations to Switzerland should be aware of these problems and should warn transferees. Whether its Swiss nationals in the U.S. or U.S. expats in Switzerland, these assignees could be asked to close or transfer their Swiss bank accounts due to new Government regulations. This should not affect Swiss Nationals in the U.S., but unfortunately it has due to certain Swiss banks refusing to service any individual with ties to the U.S. which includes the expatriate population.
The IRS has placed an increasing amount of pressure on Switzerland resulting in the following:
Swiss Government is overlooking its secrecy laws allowing banks up to a year to offer up the names of Americans engaged in tax evasion under the U.S. Disclosure Program in hopes the U.S. will accept this in exchange for a promise not take further legal action against Swiss banks.
Switzerland is working to finalize legislation for handling the tax disputes by creating a legal basis for banks to hand over client names without violating Swiss law which will help them avoid prosecution.
Large banks like Suisse Group and UBS are offering Americans the option to transfer their funds into a specially created unit registered in the U.S. or lose their accounts while smaller banks are closing accounts claiming they are too risky.
Switzerland banks are now required to register with the Securities and Exchange Commission (SEC) in order to service Americans. Switzerland has stated there are no issues with Americans opening accounts as long as they agree to sign documentation allowing banks permission to disclose bank details required for IRS reporting purposes.
While living abroad the United States requires all Citizens to: file tax returns, pay tax on any earned income, and report accounts with amounts over US $10,000. The U.S. Government has claimed there is approximately US $50 billion in unpaid taxes to be recouped. This has many people worried about how much this is going to cost them, but the ultimate fear is jail time which can only be avoided through voluntary disclosure.