Swiss Bank Secrecy Threatened After UBS Tax Deal

Swiss Bank Secrecy Threatened After UBS Tax Deal
Switzerland Embarks on an Uphill Battle to Retain Its Treasured Banking Secrecy
By Lisa Jucca and Jonathan Lynn
February 19, 2009

ZURICH/BERNE (Reuters) - Switzerland on Thursday embarked on a struggle to defend a landmark decision allowing bank giant UBS to transfer client data to the United States in a tax settlement that experts say will dilute bank secrecy laws.
UBS, the world's biggest bank to the rich, agreed late on Wednesday to pay a hefty $780 million fine and disclose the identity of some clients after U.S. investigators accused it of helping wealthy Americans to dodge taxes.
Some observers believed the deal opens cracks in the country's tough bank secrecy laws and could potentially undermine the $7-trillion global offshore banking industry.
President and Finance Minister Hans-Rudolf Merz defended the settlement said the principles of secrecy remained in place. He said UBS had had no choice but to settle the case to avoid criminal charges that could have threatened its existence and undermined Switzerland's economy.
"Bank secrecy will stay," Merz told a news conference.
"It became evident that if the American authorities would bring UBS to an indictment...the whole threat would have been falling also on our economy."
Switzerland does not consider tax evasion a crime, and Swiss law prohibits disclosure of client data or names unless the country's authorities believe the client has committed a serious crime such as money laundering or tax fraud.
Both Merz and UBS Chairman Peter Kurer said on Thursday the data exchange concerned solely cases of tax fraud, though a Swiss administrative court has not yet had the chance to say whether any fraud had been committed.
The financial crisis is heaping added pressure on tax havens like Switzerland to stop helping the wealthy hide their money from the taxman as governments seek funds to pay for more spending.
Germany has said it wants Switzerland put on a tax haven blacklist and launched a probe last year into its nationals stashing assets in Liechtenstein.
The German Finance Ministry had taken note of the UBS settlement but had no comment to make, a spokeswoman said.