US charges Wegelin with aiding tax fraud

The United States Justice Department says it has indicted Switzerland’s oldest private bank, Wegelin & Co.

This content was published on February 3, 2012 minutes and agencies

US officials claim the bank – founded in 1741 – conspired with Americans and others to hide more than $1.2 billion (SFr1.1 billion) in client assets from the Internal Revenue Service.

The announcement represents the first time an overseas bank has been indicted by the United States for enabling tax fraud by US taxpayers.

Justice officials said on Thursday they had also seized more than $16 million from Wegelin’s correspondent bank in the US, Swiss bank UBS. Because Wegelin has no branches outside Switzerland, it used correspondent banking services, a standard industry practice, to handle money for US-based clients.

On January 27, Wegelin effectively broke itself up by selling the non-US portion of its business.

Wegelin senior managing partner Konrad Hummler said the sale had resulted from “the extraordinarily difficult situation and threat to the bank brought about by the legal dispute with the US”.

The indictment signals a ramping up of pressure on ten other Swiss banks under investigation by the Justice Department, including Credit Suisse, Julius Bär and Basler Kantonalbank.

It also represents the latest blow to the tradition of Swiss bank secrecy in a long-running US crackdown on tax dodgers. Switzerland is seeking a global solution for its entire banking industry, not just the 11 banks under criminal scrutiny.

On Tuesday, US authorities were handed encrypted data on bank employees who served US clients suspected of dodging taxes. Switzerland said it would only provide the key to decipher the data once the row was settled.

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