December 31, 2013 – 16:08

The bigger Swiss banks had originally sparked the DoJ crackdown by knowingly or recklessly harbouring untaxed assets. But smaller regional institutions, which make up one in four of all Swiss banks, may also face considerable penalties, despite shouldering a far lesser burden of guilt.

Under the terms of the Swiss-US tax deal, signed in August, the US authorities asked the 300-plus banks in Switzerland to arrange themselves into four categories depending on whether they have any tax evaders on their books.

The categories range from group one for banks that are already under active investigation for suspected tax evasion offences, to group four for mostly regional institutions with very limited exposure to foreign clients.

The larger players including UBS, Credit Suisse, Julius Baer, Pictet and the Zurich and Basel cantonal banks as well as some Swiss subsidiaries of foreign banks, are part of the first group admitting their guilt. The currently about one dozen members of the first group are also the most likely to have the financial means to absorb the administrative and legal costs resulting.

Pleading guilty

For some Swiss banks the programme has come too late. UBS is not participating because it already reached a settlement with the US authorities in 2009. Meanwhile, banks Wegelin and Frey have gone out of business after incurring the DoJ’s wrath.

By joining the Swiss-US deal banks can reduce their criminal liability to a civil offence and pay a financial penalty. Given the level of uncertainty, it was a difficult choice to make for most of the banks.

Several banks have chosen to play safe and plead guilty in the scheme brokered by the two countries’ governments because they could not say definitively that all their US clients paid their taxes – although they never actively sought US clients.

The majority of cantonal banks and some private banks, such as Edmond de Rothschild or Lombard Odier, have opted for group two, which means that they know or suspect that they have committed tax evasion offences in the US. By coming clean before the end of the year, these just over 30 banks would avoid criminal prosecution but would be subject to big fines.

About two dozen regional banks that primarily focus on mortgages and usually do not manage assets for any foreign clients, said they are either in groups three or four. A handful of locally active banks are not participating in the programme at all.

 

Degrees of sin

Under the terms of the Swiss-US tax deal, signed in August, the 300-plus banks in Switzerland will be arranged into four categories by the DoJ.

Group 1: The 14 banks already under active investigation for suspected tax evasion offences.

Group 1 includes: Credit Suisse, Julius Baer, Zurich and Basel cantonal banks, Pictet, HSBC Privatbank, Liechtensteinische Landesbank, Bank Leumi, Bank Hapoalim, Bank Mizrahi, Rahn & Bodmer, Bank Wegelin, Bank Frey, Neue Zürcher Bank.

Group 2: Those banks that know or suspect that they have committed tax evasion offences in the US.

Group 2 includes: the cantonal banks of Aargau, Bern, Fribourg, Geneva, Graubünden, Jura, Lucerne, Neuchâtel, Nidwalden, Schaffhausen, St Gallen, Ticino, Vaud, Valais, Zug as well as Bank Coop, Bank Linth LLB, Banque Privée Edmond de Rothschild, Cornèr Bank, EFG International, Hyposwiss, Hypothekarbank Lenzburg, Lombard Odier, Migros Bank, Piguet Galland, Postfinance, Rothschild Bank, Saanen Bank, Valiant, VP Bank (Schweiz), Union Bancaire Privée,

Group 3: Banks that have US customers but believe that they, and their clients, have complied fully with US tax regulations. Vontobel, Cembra Money Bank and Bâloise Bank SoBa said they are part of group three. They may be joined by Bank am Bellevue, Notenstein and Valartis.

Others were still undecided, saying they would be either in group three or four. These include Thurgauer KB and Raiffeisen, VZ Depotbank.

Group 4: Banks with very limited exposure to foreign clients – no more than 2% of total client base are non-local. They include the cantonal banks of Appenzell, Glarus, Obwalden, Schwyz, Uri as well as the Zurich subsidiary of Clientis,  Acrevis Bank, AEK Bank, DC Bank, Regiobank Solothurn.

BZ Bank and Globalalance said they will not participate in the programme. UBS will also not participate because it already reached a settlement in 2009.