Who hasnÃ¢â‚¬â„¢t heard of the ubiquitous Ã¢â‚¬Å“secret Swiss bank accountÃ¢â‚¬Â Ã¢â‚¬â€œ it is right up there in financial folklore with Ã¢â‚¬Å“off-shore tax havenÃ¢â‚¬Â and Ã¢â‚¬Å“an account in the CaymansÃ¢â‚¬Â. Switzerland has long been a preferred destination for those looking to keep a lid on their financial dealings Ã¢â‚¬â€œ from the nobility of Europe during the French revolution, to the Ã¢â‚¬Å“newÃ¢â‚¬Â rich of today looking to avoid taxes (or possibly even the source of their wealth itself).
In 2008, the International Financial Services, London (www.ifsl.org.uk) reported that $1.8 billion USD was deposited by non-Swiss residents, making Switzerland the worldÃ¢â‚¬â„¢s largest offshore financial center. But recent international rules on the sharing of client details could mean the days of the secret bank account are coming to an end. One prominent Swiss bank Ã¢â‚¬â€œ Wegelin & Co. which just happens to be SwitzerlandÃ¢â‚¬â„¢s oldest bank Ã¢â‚¬â€œ recently went so far as to actually tell its clients to either sell their U.S. assets, or find another bank.
Wegelin & Co. Managing Partner Konrad Hummler said in an interview on Tuesday that the bank officials Ã¢â‚¬Å“came to the conclusion that itÃ¢â‚¬â„¢s [the new US regulations] a threat to our clients. ItÃ¢â‚¬â„¢s also a threat to us as a bank because as a custodian, we are an executor to the estate. We find this aspect discomforting, so we recommend selling all American securities whatsoever.Ã¢â‚¬Â
For decades, countries have been trying Ã¢â‚¬â€œ with little success Ã¢â‚¬â€œ to gain access to information on accounts their citizens hold with Swiss banks; but at last AprilÃ¢â‚¬â„¢s G20 meeting, sufficient pressure was brought to bear on Swiss authorities, that regulators agreed to force banks to share account details on their non-Swiss customers. British Prime Minister Gordon Brown hailed the agreement as Ã¢â‚¬Å“a new global financial order founded in transparencyÃ¢â‚¬Â, declaring that Ã¢â‚¬Å“the era of banking secrecy is overÃ¢â‚¬Â.
A bit over the top perhaps, but there is no question that the concept of the Swiss bank account has been changed forever. In May, Washington tabled new laws expected to recover close to $8 billion from private individuals sheltering funds offshore, and about $300 billion from corporations using a tax law loophole allowing them to defer taxes on profits earned in foreign countries. But the pivotal case destined to set a new precedent for client disclosuere involves UBS, a bastion of the Swiss banking industry.
The Internal Revenue Service (IRS) led the governmentÃ¢â‚¬â„¢s charge against UBS, finally coercing the banking giant to provide the names and account details for several thousand U.S. citizens suspected of evading taxes in their homeland. Swiss authorities finally relented, providing a list of names thought to include nearly five thousand accounts.
The IRS has offered amnesty for those that voluntarily declare their offshore accounts, but for those that hope to avoid a hefty tax bill, time could be running out. Shortly after receiving the list from UBS, the IRS brought charges against the first of these account holders with many more expected in the coming months.
About the Author
As a content writer specializing in the financial sector, Scott Boyd has produced educational materials and conducted market analysis for several of CanadaÃ¢â‚¬â„¢s leading financial institutions. Scott now contributes articles to OANDA’s Forex blog and is keenly interested in the factors affecting global currency prices.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.