Switzerland's banks are well known for their secrecy in handling clients' financial affairs. (Reuters)
Swiss banks' notorious secrecy may gradually end after an agreement between Switzerland and the US on a new programme to hand over account information of tax evaders.
The programme, part of US efforts to curb tax evasion by those hiding assets outside of its country, gives guidelines on punishing those banks that helped wealthy Americans with secret accounts.
"In addition to strengthening our partnership with the Swiss government, the program's requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the US treasury from across the globe," US Attorney General Eric Holder said.
According to the Swiss government, the deal respects its legal system and sovereignty, and promotes cooperation between the two countries.
The deal will allow around 100 second-tier Swiss banks to pay penalties to avoid or defer prosecution in connection with a probe by US authorities into tax-dodging by Americans. It also requires them to disclose cross-border activities and account information about US customers to avoid prosecution
"This program will provide us with additional information to prosecute those who used secret offshore bank accounts and those here and abroad who established and facilitated the use of such accounts," said Deputy Attorney General James Cole.
"Now is the time for all US taxpayers who hid behind Swiss bank secrecy laws or have undeclared offshore accounts in other foreign countries to come forward and resolve their outstanding tax issues with the United States."
Others also welcomed the deal.
"This agreement represents further progress for the US in breaking down Swiss banking secrecy and extracting information on potential US tax evaders," said Ben Jones, tax expert at global law firm Eversheds.
"It further emphasises the political and economic clout of the US in tackling tax evasion.
"This agreement and previous prosecutions of Swiss banks have succeeded in both obtaining vital information about US citizens with Swiss bank accounts and professional advisers that assist with potential tax evasion, as well as significant payments from such Swiss banks.
"This is in stark contrast with the recent UK/Swiss tax agreement which, although providing for Swiss banks to make payments to the UK in respect of UK account holders, importantly does not require the Swiss banks to pierce the banking secrecy veil and disclose details of relevant account holders or their professional advisors."
Lifting Shroud of Swiss Secrecy
The Swiss banking industry has been seen as home to a tradition of bank confidentiality, secured by laws that do not consider tax evasion a crime.
Bank secrecy protections under Swiss law are similar to confidentiality protections binding doctors in their dealings with patients.
With its uniquely opaque banking industry, Switzerland has attracted more than $2tn (£1.3tn, €1.5tn) in deposits from overseas investors, according to certain estimates.
Major economies, especially those hurt by the financial crisis, have been seeking to crack down on evasion by citizens and companies to bolster tax receipts.
After locking horns with Switzerland over the tax evasion issue since 2009, the agreement is regarded as a major victory for the US in lifting the shroud of secrecy of the Swiss banking system.
Meanwhile, Swiss officials hope to protect its key banking sector amid widening tax evasion probe from the US that could trouble or close more banks.
In January, Swiss bank Wegelin & Co. pleaded guilty to conspiring with American clients to hide more than $1.2bn from taxation. The bank was ordered to pay about $57.9m in restitution, a fine and forfeiture in March, resulting in the closure of its business.
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