Right now, it's mostly the smaller Swiss banks that have publicly announced they will no longer accept business from U.S. clients. The two other giant Swiss banks -- Julius Baer (JBHGF) and Credit Suisse Group (CS) -- have not publicly stated whether or not they will change their procedures for handling U.S. clients.
UBS began shutting down its money-management business for wealthy American investors at its private bank in Switzerland. U.S. wealth-management accounts were switched to its U.S. wealth-management unit, formerly Paine Webber. If U.S. residents didn't like that option, they could switch to an SEC-regulated unit based in Switzerland called Swiss Financial Advisors. U.S. residents who declined both options were asked to leave the bank.
U.S. citizens are taxed on all world-wide income regardless of its origin, but some have used Swiss banks and other banks with similar secrecy laws to hide assets and avoid taxation. The IRS, along with other members of the G20 nations, are looking to break the back of these secrecy laws and collect taxes from wealthy individuals who have been hiding their money.
The UBS case, which is set for a hearing August 3, could be settled outside of court. U.S. Secretary of State Hillary Clinton will meet with Swiss foreign minister Micheline Calmy-Rey on July 31 to try to work out a deal before that court hearing. The Swiss have threatened to seize the bank records of UBS if a U.S. court orders the names of banking clients to be released. The IRS wants the names of 52,000 U.S. citizens or companies that bank with UBS. U.S. tax officials believe that UBS is hiding $20 billion of U.S. taxpayers' money in secret Swiss accounts.
Swiss secrecy laws do not protect depositors from fraud, so if the U.S. can prove any of UBS's clients are avoiding taxes, those accounts would not be protected by Swiss laws. However, the Swiss think that the IRS's request for information on 52,000 U.S. account holders is too broad as it has no proof that all 52,000 have evaded taxes.
Calmy-Rey told Reuters, "For us this is not primarily about UBS. It is about Switzerland's sovereignty. We want our laws to be respected. It is also about our financial center and about jobs. A solution in the UBS case must fall within Swiss laws."
Clinton and Calmy-Rey will likely work out a deal before the August 3 court date. No one expects this case to be settled by the U.S. courts. But in reality, with all the changes to U.S. account holders in Swiss banks, the IRS has made its point and the tax haven that was Switzerland will no longer be as safe.
Lita Epstein has written more than 25 books including Trading for Dummies.