Swiss banks are under fire as the US Justice Department demands the names of 52,000 Americans holding secret accounts. Its part of a wide-ranging probe to catch tax evaders but it is also putting enormous pressure on one already troubled Swiss bank: UBS. The World's Gerry Hadden reports.
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LISA MULLINS: I'm Lisa Mullins and this is The World. The Justice Department is going after Switzerland's biggest bank. The government wants UBS to identify tens of thousands of its American clients who may be evading US taxes. Last month, UBS admitted it helped wealthy Americans hide money from the IRS. It paid hundreds of millions of dollars in fines and gave up the names of 300 depositors. But as Gerry Hadden reports, US authorities want more.
GERRY HADDEN: Secrecy is what has long made Swiss banks attractive to the wealthy, including Americans. One American, who we'll call simply “Client X†would only speak if his voice was digitally altered. He says he and his family kept their nest egg in a Swiss a bank for some 25 years tax-free.
CLIENT X: It was not a huge amount, relatively speaking. It was just under a million dollars.
HADDEN: For Swiss banking authorities, the issue isn't whether Americans like Client X hide money in their vaults. It's how the US has decided to go after them, says Urs Roth, President of the Swiss Banking Federation. Roth is referring to the US Justice Department's recent threat to indict officials from Swiss bank UBS in order to get names of Americans suspected of fraud. He says, “tax fraud is not protected by Swiss law and the Swiss bank secrecy. Switzerland provides administrative assistance in cases of tax fraud. What's alarming, in my opinion,†he says, “is the attitude of the US authorities. They insisted on UBS revealing the information on the bank accounts without going through the proper channels.†But US officials say Swiss authorities have not been cooperating and they're taking their offensive to another front. The IRS has announced it will sue UBS to get 52,000 more American names. The Swiss government has ordered UBS not to hand them over, arguing that would violate Swiss privacy laws. In Switzerland itself, the US actions against UBS are causing outrage. Politicians, under public pressure, are taking to the airwaves to denounce the Americans and any Swiss who suggest giving in to their demands. Socialist politician Jean Studer told Swiss TV he was concerned because just weeks ago the Swiss government vowed to defend its secrecy laws, and now some leaders are suggesting they're negotiable. He said Switzerland must go on the offensive, underscoring the advantages of its financial laws. At least one American agrees with him. Faith Whittlesey served as US Ambassador to Switzerland in the 1980s and now chairs the American Swiss Foundation.
WHITTLESEY: It's a shame, I think, that Switzerland is being singled out, because Switzerland has been an excellent partner with the United States in the war on terror, on drug trafficking, money laundering, and a wide variety of other areas. And I worry that what appears to be the bullying of Switzerland might jeopardize this.
HADDEN: The US actions could also change Switzerland's relations with its European neighbors. This week, French President Nicolas Sarkozy said if Switzerland didn't reform its banking rules, it could get placed on a black list of financial safe havens. And the Swiss banks' European clients could end up suffering the same scrutiny as their American clients have. Michael Reiterer is the European Union's Ambassador to Switzerland. “It's justifiable,†he says, “for the EU to want the same relationship with Switzerland as Switzerland has with the US.†For the Swiss, these are worrying dents in their banking armor. But they're hardly the first. More than 20 years ago, Switzerland began sharing with the US information on clients suspected of drug trafficking. Then came 9/11, and Switzerland applied the same rules to suspected terrorists. At that point, says Client X, his own Swiss banker advised him to take his money elsewhere. So he did.
CLIENT X: A fair amount got invested and spent, and then we moved it into different off shore banking havens. It's moved around quite a bit since then.
HADDEN: Client X may have stayed clear of US tax authorities, and the tens of thousands of American customers with Swiss Bank UBS are no doubt already looking themselves for new shelters for their wealth. For The World, I'm Gerry Hadden.
MULLINS: Swiss banking is just one of the topics tackled by our artists in our weekly cartoon slideshow. You can check it out at theworld.org.
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