Privacy of Swiss Bank Accounts Eroding Rapidly

Historically, privacy was always a basic feature of Swiss bank accounts. The premise was that no government had the right to know the contents of accounts or other information about their holders.

Today, however, the privacy protections that formerly came with Swiss and other foreign accounts are changing profoundly. The impetus for change is the Foreign Tax Compliance Act (FATCA). Though not yet fully phased in, FATCA is already putting considerable pressure on Americans with foreign accounts to sign away their secrecy rights.

It isn’t only the IRS that has Swiss banks in the cross-hairs of a stepped-up tax enforcement effort. Tax authorities from other European countries are taking aim at the Swiss as well, seeking more information on foreign account holders with possible taxes due.

For the Swiss, it’s been a painful reckoning. After all, this is a country whose banking industry accounts for 7 percent of its economic output, according to Reuters.

Yesterday, Reuters reported that 11 Swiss banks are being investigated by U.S. authorities for their possible role in facilitating tax evasion. The Swiss finance minister, Eveline Widmer-Schlumpf, has proposed a settlement agreement so that the U.S. and the 11 banks can resolve the dispute.

To help make its case for this deal, the Swiss government has offered at least tentative agreement with the emerging requirement of FATCA. Many Swiss bankers are concerned, however, that FATCA will hamper the willingness of their clients in invest in U.S. securities.

Meanwhile, German and other European regulators are also after client data from Swiss banks. In short, the privacy of Swiss bank accounts is under siege from more than one side.

Source: “Apologetic Swiss banks sweat it out as U.S., Europe mull redress,” Reuters, Katharina Bart, 8-12-12

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