Ethical Performance
inside intelligence for responsible business


Swiss bank Wegelin set to close after admitting to tax evasion charges

February 2013

Wegelin, Switzerland’s oldest bank, has been ordered to pay almost $70m (£43m, €52m) in fines and penalties for helping wealthy Americans to evade taxes.

It admitted in a New York court that it allowed more than 100 US citizens to hide around $1.2bn from the Internal Revenue Service and file false tax returns for nearly ten years.

Wegelin, the first foreign bank to admit tax evasion charges in the US, will now close permanently.

Several Swiss banks have, in recent years, stopped offering offshore accounts to US citizens. Preet Bharara, the US attorney for New York’s southern district, told the court: “The bank wilfully and aggressively jumped in to fill a void that was left when other Swiss banks abandoned the practice due to pressure from US law enforcement.”

Otto Bruderer, a managing partner at Wegelin, said the bank realised its conduct had been “wrong”, and that tax evasion was common practice in Switzerland.

More than two years ago, three Wegelin executives were accused by US prosecutors of involvement in the tax law breaches. Then, in January 2011, Wegelin sold its core Swiss and other non-US businesses to Raiffeisen Bank. It ceased trading as a Swiss bank around a year ago, retaining only its US clients, including those under investigation by the US authorities. Shutdown will follow when the fines and penalties have been paid.

Jeffrey Neiman, a former US federal prosecutor, said: “It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts. What is clear is that the Justice Department is aggressively pursuing foreign banks who have helped Americans commit overseas tax evasion.”

The US authorities are still to decide whether to prosecute the original three Wegelin executives – Michael Berlinka, Urs Frei and Roger Keller – in light of uncertainty over whether extradition arrangements with Switzerland extend to Swiss nationals accused of tax crimes.

The Obama administration sees Wegelin’s guilty plea and conviction as a victory in its vigorous pursuit of US citizens using offshore banks to evade taxes.

Four years ago, Swiss bank UBS agreed to pay the US authorities fines of $780m for tax evasion under a ‘deferred prosecution agreement’, avoiding criminal charges and a court appearance. It also volunteered to reveal the details of US account holders.

Wegelin | Europe | Tax Evasion


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