Historically, the term “Swiss bank” was synonymous with hiding assets. As the extremely wealthy poured they cash in over the years, much of this money went into a black hole, where the US and European governments did not see, but more importantly, tax, it.
This is a serious issue for the US government in particular, as the Treasury department estimated losses around $100 billion a year due to offshore tax cheats. However, there may now be the first chink in the armor.
Bradley Birkenfeld, a former banker at UBS, was sentenced in August of this year to three years and four month in prison for helping a billionaire hide their assets from American tax authorities. Mr. Birkenfeld has since been acting as an informant and liaison to the government, shedding light on the extent of American’s use of secret Swiss bank accounts in an effort to avoid taxes. Partly due to Mr. Birkenfeld’s disclosures, UBS has agreed to disclose to the United States the names of 4,450 wealthy Americans suspected of hiding assets and dodging taxes in secret accounts. A similar effort is underway in Europe currently, as France is concerned with its own lost tax revenue to the Swiss bank accounts.
As Birkenfeld is scheduled to start his prison term shortly, his lawyer has petitioned a Florida court to postpone the scheduled January 8 start, saying that he is ready to cooperate further with the United States government, and is willing to assist further in building the broader case.
While this may seem like a single case of one man seeking to delay the inevitable punishment, this may have much broader effects. As US regulators strengthen policies in the US (i.e. the Patriot Act), if foreign firms, particularly Swiss banks, were forced into similar regulations, the entire industry would be reshaped. The flight of cash to Geneva and Zurich that had become quite common could very well ebb, domestic governments would see an influx of cash, and the banking sector in Switzerland would have to reshape itself to serve a new purpose. The air of secrecy may evaporate, leaving the Swiss without a banking advantage.
