Cabinet approves bank data transfer solution

Swiss Finance Minister Eveline Widmer-Schlumpf on her way to meet the press after cabinet approves new data transfer framework Keystone

The Swiss government has agreed to give special permission for banks to cooperate with the United States authorities, paving the way for financial institutions to share data in a bid to avoid criminal charges for allegedly helping tax dodgers.

This content was published on July 3, 2013 - 15:52 and agencies

The cabinet agreed on parameters for granting authorisation on a case-by-case basis on Wednesday in an attempt to draw a line under the long-running tax evasion dispute with the US that has affected relations over the past four years.

The new procedure is a compromise on the part of Swiss Finance Minister Eveline Widmer-Schlumpf whose proposal to introduce new legislation to enable banks to cooperate with the US authorities was rejected by parliament last month.

Fourteen Swiss banks are reportedly under investigation in the US for allegedly helping rich clients evade tax. The list includes Credit Suisse, Julius Baer, the Swiss arm of Britain's HSBC, privately held Pictet in Geneva and local government-backed Zurich and Basel cantonal banks.

The first 12 of these establishments subject to a formal investigation in the US will be first in line to receive authorisations, Widmer-Schlumpf said at a media conference in Bern, adding that she expected the government would have to process a large number of authorisations.

However a government statement stressed that banks would not be allowed to hand over client data under the new authorisation procedure.

“This data can only be supplied within the scope of existing agreements with the USA in the area of double taxation via administrative assistance,” it said.

Talks are continuing with the US justice department concerning a programme it is offering to other Swiss banks not yet under investigation to settle past actions. These banks will also need authorisation in order to participate in the programme.

To obtain the individual authorisation banks must inform employees and third-party lawyers and asset managers that may be concerned by the data transfer to the US.

For current and former employees provision has also been made for expanded welfare obligations and adequate protection against discrimination, the cabinet said.

US tax row time line

2009: Switzerland’s biggest bank UBS agrees to turn over more than 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans.
July 2011: The second-biggest bank, Credit Suisse, is under criminal investigation by US. The bank later makes a provision for a potential fine of CHF295 million.
February 2012: US justice department indicts Wegelin, Switzerland's oldest private bank, on charges that it enabled wealthy Americans to evade taxes on at least $1.2 billion hidden in offshore accounts.
June 2012: US treasury department reaches a tentative agreement with Switzerland to help banks comply with US tax evasion regulations.
June 2012: Bank Julius Baer hands 2,500 employee names to US authorities in a bid to free itself from the tax probe, according to lawyers.
August 2012: Global bank HSBC hands over details of current and former employees to the US authorities.
November 2012: Private bank Pictet confirms it is also under investigation by the US.
December 2012: Two bankers and one former employee of the Zürcher Kantonalbank charged by US, accused of helping US clients avoid taxes.
January 2013: Wegelin private bank shuts its doors, following a guilty plea to charges of helping wealthy Americans evade taxes through secret accounts. It agrees to pay nearly $58 million in fines on top of $16.3 million in forfeitures already obtained by the authorities.
May 2013: Swiss government presents bill to parliament that would let Swiss banks hand over internal information to US to avoid threatened criminal charges – though the banks still face fines likely to total billions of dollars.
The bill aims to save the banks from heavier punishment in the United States for helping wealthy tax cheats, by sidestepping its secrecy laws to let bankers disclose data to US prosecutors.
June 2013: Parliament rejects the so-called 'Lex USA bill', telling the government to make the decision.

July 3, 2013: The government announces a new data transfer framework for banks.

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The Swiss Bankers' Association (SBA) said it welcomed the fact that government had "assumed its responsibility by defining the parameters for the cooperation between banks in Switzerland and the US".

The government plans received a mixed response from parliamentarians.

“The government didn’t have much of a choice, but it remains a plan B,” said Christian Democrat President Christophe Darbellay.

He fears that most banks and institutions concerned will not be able to reply to the US demands and the transfer of information risks being held up by appeals in the courts.

The right-wing Swiss People’s Party felt the cabinet had rushed its decision, adding that it was up to the banks to find a solution themselves and not the government.

Christian Levrat, president of the centre-left Social Democratic Party, said he was ‘particularly happy’ with the new plans that protected bank employees.

Although he would have preferred that the client names were handed over rather than third parties or bank staff, the cabinet’s project was not really a surprise, said Levrat.

Complicated solution

The government has been working furiously to find a path between the intransigent US authorities and Swiss legal obstacles which hinder the transfer of confidential data.

Finding a legally compliant solution was complicated by parliament’s rejection on June 19 of the so-called Lex USA bill to settle cases.

Hanging over their heads is the possible risk the US issues any number of banks with the type of criminal indictment that signalled the annihilation of Wegelin earlier this year.

Despite Wednesday’s decision Swiss banks still risk being taken to court in Switzerland or the US.

Following a bank data transfer order issued in April 2012, a handful of bank staff served civil writs on their employers, with one achieving partial success in Geneva’s administrative court.

Swiss data protection commissioner Hanspeter Thür welcomed the cabinet plan. The new individual authorisations are a better solution that the previous 'Lex USA', said Thür.

The danger that banks violate Swiss law, as suggested by experts and parliamentarians, is less pronounced, he added.

On June 21, the court slapped a temporary ban on Credit Suisse releasing the employee’s details to the US, challenging the bank to prove that its future business interests depend on the transfer going ahead. This remains a test case, said Thür.
According to Boston Consulting Group, Switzerland is the largest centre for global offshore wealth with $2.2 trillion, or about 26 per cent of the global market.

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