Any residual illusion that the Swiss could resolve the US tax row amicably has melted away like Alpine summer snow. American authorities have shown they aren’t content to chase giants like UBS. Now, a relative tiddler, but also the country’s oldest bank, Wegelin, has fallen victim to the crackdown and broken itself up. Though the Swiss are trying to preserve some semblance of their financial system, the anti-haven snowball looks set to keep rolling.
The twin-track civil and criminal approach seems to be working for the Americans. In Wegelin’s case, the 270-year-old institution, which bade adieu to the US a couple of years ago in a scathing letter, claimed an imminent indictment of the bank was “essentially no threat.” But, Swiss newspapers are reporting that clients pulled out 4 billion Swiss francs in response to the legal danger, effectively forcing its closure.
Bern, by contrast, has fundamentally misplayed its hand. Successful deals with the Germans and the British, where cash, not information is handed over, may have lulled them into a false belief that cordial diplomatic relations would temper the US justice department’s zeal.
Instead, the Americans seem to use each new piece of information to build another case over hidden funds. The Internal Revenue Service wants names of cheats and to determine if banks broke US laws. Prosecutors also have been deft about getting indicted bankers to implicate their former colleagues, employers and clients, for leniency.
The threat of charges has had a bracing effect on firms, as much as it has on people. Credit Suisse decided to turn over US client information rather than face a summons. And, in August, the Swiss government quietly agreed to hand over client details based on “behavioural patterns,” even in situations where the Americans had no names.
The Wegelin case suggests the battle is far from over. The Americans show no sign of letting up, though investigations may lead them to cantonal banks with links to the state. The Swiss will need to make still more sacrifices to salvage their storied private banks.
