Posted on 19 Aug 2009
The United States today finalized a deal with Switzerland that sets the stage for a potentially historic disclosure. UBS, Switzerland's largest bank, will reveal the names of thousands of Americans suspected of stashing billions in secret accounts at UBS in an attempt to hide money from the IRS.
Under the deal, UBS is expected to turn over the names of Americans who controlled 4,450 accounts that are currently open or have been closed.
The secret accounts in UBS 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 said.
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 agreed to narrow its request.
More importantly, 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.
The U.S. government tried to use that channel last year but got nowhere. Switzerland has agreed to handle the request differently this time.
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 farther Switzerland is moving on the issue.
Some details of the settlement were not disclosed. 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.
It could also obscure any shift in Switzerland's bank secrecy standards.