The US government’s widening investigation into six more Swiss private banks could cause the country’s banks to cut all ties with American clients, according to a top London lawyer.
Edward Reed, a partner at London-based Macfarlanes, told Campden: “Swiss private banks will begin to pull out from US exposed deals – they will stop handling not just US nationals, but also green card holders and anyone even remotely affected by tax regulations.”
Six Swiss banks and one private bank in Liechtenstein have been added to the US regulator’s list for allegedly helping rich Americans open offshore accounts for evading tax, according to a report in the Financial Times. None of them have been named. The investigation follows the US government’s enquiries into UBS in 2007, which lead the bank revealing the names of more than 4,000 wealthy Americans holding undeclared offshore accounts to settle the dispute.
The seven banks are currently under US scrutiny for opening offshore accounts for UBS clients after the bank terminated its US business following regulatory pressure in 2008.
Mark Summers, a partner at international law firm Speechly Bircham, said although much of the impact was felt by UBS, Swiss banks should not be under the illusion that the probe will stop anytime soon. He told Campden: “There could be more banks aiding tax evasion – this should be a wake up call for them to think again about their operations.”
The US government has been pursuing Swiss banks in an attempt to find Americans who are hiding money in overseas accounts, as US law states the Internal Revenue Service must be informed of offshore accounts holding more than $10,000.
Analysts also say some banks will consider splitting their banking operations – while one arm will deal with Swiss clients, the other would exclusively handle US operations. But Summers reckons this could have its drawbacks. “Not many banks have the economies of scale to split their operations. It will be a very expensive and complicated procedure. Instead, banks will simply push their US clients to other banks which adhere to IRS regulations,” he said.
At the height of the dispute between the Swiss government and the US Department of Justice, the former announced it was considering seizing UBS banking records rather than allowing them to be handed over to the DoJ. UBS eventually paid around $780 million to the US and turned over names of its private clients to the government.