/ 10 September 2011

Would-be US tax evaders could face the hot seat

Swiss banks have “allegedly” begun providing information to Washington on accounts held by United States citizens, Swiss media reported on Saturday.

Local daily Neue Zuercher Zeitung reported that US authorities had “allegedly” received information from Swiss banks on their American customers, without citing sources.

It said that on Friday nine banks “allegedly … provided the requested information”.

Another media outlet, the daily TagesAnzeiger, said that Credit Suisse had earlier in the week provided information on US clients to Washington.

“The Credit Suisse banker responsible for the negotiations took a plane for Washington and submitted the information,” it said.

The TagesAnzeiger also said that Switzerland’s government has “partially” agreed to a Washington ultimatum that information on US nationals who have money in the country be handed over.

It said that Swiss authorities, in a confidential letter to 10 local banks said the US request could “be partially agreed upon” but that the data transfer would have to be done by the banks themselves and not the government.

Furthermore, the letter said the banks would need to provide data on banking activities only going back to September 30 2009.

Prior to that date, information should only be provided “if there is a violation of US legislation or obvious tax fraud”, the newspaper said.

On Wednesday, Switzerland’s President Micheline Calmy-Rey told reporters that Swiss authorities had not provided the names of any clients of Swiss banks to US tax authorities.

“For Switzerland, any exchange of information on client data is only possible if it is based on existing legislation,” she said, referring to the double taxation treaty reached in 2009 with the US.

Last week, local weekly SonntagsZeitung reported that Washington had asked for detailed information on US nationals who might have improperly hidden money in Switzerland, basing its report on a purported letter from the US deputy attorney general James Cole dated August 31, addressed to Swiss authorities.

US authorities want all data concerning private customers and US foundations which have deposited at least $50 000 in Switzerland between 2002 and July 2010, it said.

Swiss banks looked into
Federal prosecutors in New York are building a criminal fraud case against Liechtenstein’s oldest bank, Liechtensteinische Landesbank that could result in charges that it helped wealthy Americans evade taxes, according to persons briefed on the matter.

These persons said an investigation has been under way for at least six months.

“We do not wish to comment on this matter,” Cyrill Sele, a spokesperson for Liechtensteinische Landesbank, said on Friday when asked about the investigation.

Carly Sullivan, a spokesperson for the US Attorney’s Office in the Southern District of New York, said the office never confirmed or denied the existence of investigations and declined to comment.

Tax evasion investigations
The US Justice Department has ramped up an investigation of Swiss and Swiss-style banks with private banking operations that have enabled US clients to evade billions of dollars in taxes over the last 10 years or so.

While that broad investigation is focused on Swiss financial giant Credit Suisse AG, which received a target letter from the Justice Department; London-based HSBC Holdings Plc and an array of smaller Swiss private and cantonal banks, it has widened to include banks in other countries as well, according to persons briefed on the matter.

US officials are angry that the existence of the request was made public by two Swiss newspapers within days of the letter’s receipt by Switzerland’s Secretary of State for International Financial Matters, Michael Ambuehl and the Swiss point-man for negotiating the showdown with the Justice Department, according to these persons.

Tax haven
The scrutiny of Liechtensteinische Landesbank turns a spotlight on the tiny Alpine principality of Liechtenstein, a noted tax haven with Swiss-style secrecy laws.

Liechtenstein banks, trust companies and other intermediaries have figured in the background of indictments and criminal information charges against US clients and Swiss bankers at UBS AG, Credit Suisse and HSBC, according to court papers.

While Liechtensteinische Landesbank has not been named in any of those legal actions, it allegedly has been involved in offshore private banking schemes used for tax evasion, according to these persons.

In 2008, Mario Staggl, an executive at New Haven Trust company in Liechtenstein, was co-indicted with Bradley Birkenfeld, the former UBS private banker whose disclosures about tax evasion services at UBS resulted in the bank paying a $780-million fine, admitting to criminal wrongdoing and turning over the names of 4 450 of American clients — a watershed in Swiss bank secrecy.

A US Senate subcommittee report in 2008 detailed how a large Liechtenstein bank, LGT, owned by the country’s royal family, sold unreported private banking services to wealthy American billionaires.

Voluntary disclosures
American officials learned of Liechtensteinische Landesbank’s identity and alleged role through scores of voluntary disclosures made by wealthy Americans in recent years to the US Internal Revenue Service.

The disclosures, which offer reduced fines and penalties in exchange for coming forward with secret offshore accounts, require US taxpayers to provide detailed information about the network of banks, trusts, shell corporations and intermediaries they have used.

The deadline for entering into the second voluntary disclosure was Friday.

The private bank division of Liechtensteinische Landesbank has $68-billion at current rates. The bank has not lost money due to the crackdown on Swiss private banking and net new money inflows rose 1.1% as of end-June, to Cabout $600-million, compared with the previous year.

The bank, headquartered in the capital of Vaduz, is majority owned by the government of Liechtenstein.

It has branches and subsidiaries in Switzerland, Austria, Abu Dhabi and Dubai and works with a network of independent investment management and advisory firms, including Swiss partners Advisors, a Zurich-based firm that is registered with the US Securities and Exchange Commission. — AFP, Reuters