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Wegelin, the oldest Swiss bank, is about to close permanently after pleading guilty in a New York court to helping Americans evade taxes. The bank, established in 1741, has agreed to pay $57.8m (£36m) in fines to US authorities.
Wegelin admitted that it helped more than one hundred Americans to hide $1.2bn from the Internal Revenue Service for almost ten years. It is the first foreign bank to plead guilty to tax evasion charges in the US. According to the US Attorney Preet Bharara, “the bank wilfully and aggressively jumped in to fill a void that was left when other Swiss banks abandoned the practice due to pressure from US law enforcement.”
It is not still clear if the bank has turned over, or wants to disclose, the names of its American clients to US Authorities. Some observers think that the plan is bigger: Wegelin’s $58m fine, which was expected to be higher, would have been kept low by US authorities in return for Wegelin clearly implicating the rest of the Swiss banking community in tax evasion.
In January 2011, US accusations against three Wegelin’s executives prompted the bank to sell off its core Swiss and other non-US businesses. Since then, Wigelin ceased to work as a Swiss bank. The sale was made to protect non-American clients, leaving Wegelin responsible only for its US customers. The businesses were bought by Raiffeisen Bank, Switzerland’s co-operative bank, which has since severed the few business ties that it had with the US.
Wegelin was indicted by American authorities last February, and then declared fugitive when its executives failed to appeared in a US court. The bank claimed the fact it was following Swiss rules and not Americans, but the decision to wind down its remaining business has made the demise inevitable. Currently, the bank’s partners aim to avoid an interminable legal dispute with the US in order to recover as much as possible from what has become a shell company.
Wegelin’s plea could represent a turning point in the US battle against tax secrecy in Switzerland. Four years ago a far larger Swiss bank, UBS, agreed to pay a $780m fine to US authorities related to tax evasion charges. UBS also agreed to reveal the details of US account holders, but neither pleaded nor was found guilty: it paid the fine in exchange for the charges being dropped. Banks under U.S. criminal investigation in the wider probe include Credit Suisse, Zurich-based Julius Baer and some regional banks.
In a statement after the plea, Assistant U.S. Attorney General Kathryn Keneally said it was a top Justice Department priority “to find those who continue to shirk their tax obligations,” as well as those who help them and profit from it. “The best deal now for these folks is to come in and ‘get right’ with the IRS, before either the IRS or the Justice Department finds them,” she concluded.
