Deal to Cut Bank Secrecy Stalls in Swiss Parliament

Switzerland’s Parliament on Wednesday scuttled an information-sharing agreement with the United States that the Swiss government had hailed just weeks ago as a breakthrough in a dispute over banking secrecy, but left open the possibility for another solution.

The Swiss government said in late May that it would let banks hand over data on American clients’ hidden accounts without violating the country’s bank secrecy laws. The move was meant to help Swiss banks head off the possibility of criminal prosecution for helping Americans evade taxes.

But the proposal proved contentious in a country that has long prided itself on the discretion of its bankers, and it failed to gain the necessary support.

Some members of Parliament raised concerns about the precedent that any such agreement might set at a time when Switzerland’s banking secrecy is also under attack from the European Union — of which the country is not a member. They also complained that the terms were not fully revealed and that the Swiss federal authorities were pushing Parliament to pass the deal by Friday, to go into effect July 1.

The Parliament did signal its willingness to find an alternative. Eveline Widmer-Schlumpf, the Swiss finance minister and president of the governing Federal Council, said in a statement that the government “will do all it can within the scope of its legal powers to allow the banks to resolve the tax dispute.”

The Swiss news service Agence Télégraphique Suisse said Ms. Widmer-Schlumpf had urged Parliament to let banks take the United States up on its offer. “Washington knows no forgiveness,” she told legislators.

The Swiss have been working to assuage officials in Washington since 2009, when UBS settled with federal authorities in a tax evasion case. UBS, the largest Swiss bank, paid a $780 million fine and agreed to hand over 4,450 client names to resolve accusations that it helped wealthy clients avoid taxes.

The Justice Department has since begun investigations into a dozen Swiss banks. One bank Wegelin Company, which was indicted, ceased operations.

The failure of the bill Wednesday could prompt Washington to take new action against Swiss lenders.

The Swiss Banking Association said in a statement that it “regretfully takes note” of Parliament’s decision, saying that such a law would have been the best means for helping banks “make use of the U.S.’s program in order to draw a line under the past.” The group called on the Swiss Federal Council “to assume its responsibility and do everything in its power to ensure that a legal framework is created that nevertheless renders the implementation of the U.S. program possible.”

The consequences of the rejection “are incalculable,” the banking association added. The Justice Department declined to comment.

There is wide recognition in Switzerland that a deal with Washington is essential to wipe the slate clean. Actual client data would not have been turned over, but authorities in the United States could have made use of the information to track down tax cheats. Critically, in a country where disclosing such information violates the law, bank employees would have been protected under the proposed deal.

Article source: http://www.nytimes.com/2013/06/20/business/global/swiss-parliament-scuttles-us-deal-on-bank-secrecy.html?partner=rss&emc=rss