Always suspect as a source for news rather than liberal opinion, yesterday The New York Times reported: "The veil of Swiss banking secrecy is quietly being lifted — by Switzerland."
What's that, you say? Swiss banking secrecy dead?!
Financial reporter Lynnley Browning wrote: "Switzerland’s tax authorities, under pressure from a growing United States investigation into the Swiss bank giant UBS, are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department, two people briefed on the matter said Tuesday. The move would represent a significant shift in Switzerland’s banking secrecy laws, whose tradition dates to the Middle Ages."
According to Browning, UBS began handing over data on hundreds of American clients with offshore private banking accounts to the Swiss taxing authority starting in August. The delivery to the Justice Department, expected to take place within several months, would place American client names in the hands of federal prosecutors seeking to build criminal cases against wealthy Americans they suspect of tax evasion.
IRS Fishing Expedition
In May, a U.S. District Court judge in Miami, Florida, wrongfully in my opinion, authorized the U.S. Internal Revenue Service to seek information from Switzerland's largest bank, UBS, concerning unnamed American taxpayers the IRS claims may have evaded income taxes. I have stated my views of the invalidity of these court and IRS actions and the applicable Swiss law.
The court order allowed the IRS to serve a summons on UBS, which has extensive operations and thousands of employees in the United States, to obtain information on possible "tax fraud" by an alleged 19,000 Americans with UBS accounts whose identities the IRS is seeking. The basis for the court order was the stupidity of UBS private bankers who, over a period of years, may have advised wealthy Americans on how to evade taxes.
At the time I wrote: "The big question now is whether UBS, the supposed giant of Swiss banking, will have the guts to take a strong stand based on the Swiss bank secrecy laws and fight for the principle of its clients' financial privacy...Even if UBS is willing to abandon its American customers to the IRS, I suspect that official Switzerland...[is] going to stand and fight for their basic bank secrecy laws -- laws that have been revised and updated to accommodate reasonable law enforcement requirements."
Swiss Banking Law Stands Firm
So if you believe The Times article, for this first time in centuries, Swiss banking secrecy has been breached -- indeed, surrendered by the Swiss government itself!
On the contrary, as I predicted months ago, while the UBS quakes at IRS demands, the Swiss government stands firm -- even though that official firmness is cloaked in the language of diplomacy for which the Swiss are famous.
From Zurich, Marc-André Sola, Managing Partner of NMG International Financial Services Ltd and a valued member of the Sovereign Society Council of Experts viewed the situation and wrote to us today: "We all know that the world has become more transparent. But, Swiss banking secrecy law is very clear. There is no way that UBS is just handing over lists with client information to third parties, including the IRS.
"Information can only be exchanged if there is a concrete inquiry (with specific names) in the event of a criminal investigation. It must involve an alleged crime under Swiss law and tax evasion is not a crime but, tax fraud is. The difference between the two is simply that if you forget or fail to declare and file your income taxes, that’s tax evasion. If you forge documents or make false statements, that’s tax fraud.
"Of course these legal rules only apply to clients of UBS in Switzerland or other countries with banking secrecy laws such as Austria or Luxembourg. But, UBS has many branches all over the world, many in countries without banking secrecy laws. It may well be that UBS will disclose client information on a broader basis on clients in those countries."
No Need to Panic
As Marc says, according to Swiss law, bank secrecy can only be lifted in connection with a criminal offense of tax fraud or money laundering. Tax evasion isn't a crime in Switzerland. Should the finance ministry agree for the account details to be released, account holders would be informed before their details are handed over, giving them the option to go to court to oppose the release, a Swiss official said.
As much as the political Left and The New York Times would like to destroy Swiss banking secrecy, the limited cooperation of the Swiss government in this case is well within that nation's banking secrecy laws.
And in the final analysis, if Americans have participated in tax fraud, they should be held accountable -- but not at the expense of the laws of Switzerland.
There is a great deal the Swiss can do to defend their laws – and they are doing it.
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