This is the first instance of an overseas bank being indicted by the US for enabling tax fraud by US taxpayers. In the first big breach in Swiss secrecy, UBS agreed in 2009 to pay a $780m fine for aiding tax evasion and turned over data on more than 4,400 accounts.
Last month, US authorities indicted Wegelin and three of its clients manager alleging that they helped American nationals hide more than US$1.2 billion in offshore bank accounts. The case is part of a US crackdown on alleged tax evasion.
The three Wegelin bankers were also declared fugitive as they too failed to appear before the court.
Wegelin in a statement said that its representatives didn’t appear because the legal prerequisites to initiating criminal proceedings under US law have not been met.
"The circumstances create a clear dilemma for Wegelin & Co.: If it were to adhere to current US legal practice aimed at Swiss banks, it would have to breach Swiss law," the bank said.
The US District Judge Jed Rakoff, who is presiding over the case, suggested that US prosecutors enlist the help of diplomatic authorities, including perhaps the State Department, to advance the case.
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By GlobalDataUS authorities have also seized more than US$16 million from an account Wegelin has with Swiss bank UBS in Stamford, Connecticut.
As a preemptive measure, Wegelin sold its non-US operations to fellow Swiss bank Raiffeisen in late last month to safeguard its assets.
The move will set the alarm bell ringing for at least 11 foreign banks which are also being investigated by the US Justice Department’s tax division in related cases.
This is a yet another body blow for the famed Swiss banking secrecy law and bound to further dent their reputation as safe tax haven.
WealthInsight believes that the latest development will further hasten the ongoing talk between US and Swiss governments on banking secrecy and we can expect an agreement to be reached sooner than expected by many.
Switzerland has already struck deals with Germany and Britain to enable them to claw taxes back from their nationals.
