Bank founder Emil Wegelin
The announcement from St Gallen is the latest dramatic development in several years of mounting pressure on Swiss banks by tax authorities in the US and Europe. Leading lawyers described the bank’s move as ‘unprecedented’ and certain ‘to have ripple effects in the private banking industry’ as those institutions grapple with beefed up US and European legislation.
Salting away cash
According to a BBC report this morning, officials said the 272-year-old bank would cease trading once it had coughed up nearly $60 million in fines to the US authorities. The broadcaster reported that bank executives admitted to helping more than 100 US citizens salt away some $1.2 billion in funds to escape tax liabilities over nearly a decade.
The New York Times reported that senior bank figures appeared before a Federal District Court in Manhattan, including one of the institutions’ managing partners, Konrad Hummler. The Times gave the size of the fine as bigger than that reported by the BBC, claiming the bank would have to hand over $74m.
One leading US tax lawyer said the Wegelin case was just the beginning of a much wider impact of America’s Foreign Account Tax Compliance Act.
Commented James Mastracchio, the partner heading the tax team at the Washington office of law firm BakerHostetler: ‘As the global banking community becomes FATCA compliant -- particularly for those foreign institutions operating in countries with intergovernmental agreements -- transparency and the sharing of information will continue with the US and by agreement and in practice, such that foreign financial institutions will be under greater pressure to make unprecedented agreements to follow US laws and regulations. While most likely not the primary incentive, this plea does provide an example of what might become the normal relations between the US and FATCA-compliant jurisdictions.’