Credit Suisse and Zurich Cantonal, have obtained government approval to send the US Department of Justice (USDoJ) lists of American clients who have moved assets out of their accounts to another bank.
The so-called 'leaver lists' do not identify clients but do name the destination banks, which the USDoJ will then pursue with further disclosure notices.
The Swiss government announced a new approach allowing banks to hand over data to U.S. authorities in a bid to solve a dispute over undeclared assets and forestall further indictments by the Department of Justice.
Client data isn’t covered by the authorization, according to the government. That information can only be handed over in response to a request for administrative assistance by the U.S. under existing double-taxation agreements, it said.
The Swiss government recently announced it is negotiating individual agreements with each bank to allow them to pass on this information, which would otherwise be a gross breach of Swiss privacy laws. However, these agreements will not allow the banks unrestricted powers of disclosure. In particular, the so-called 'leaver lists' will not identify clients by name. But they will give details of the assets moved, and crucially they will name the destination banks.
The official reason cited for disclosing leaver analysis information to the US authorities is that it will help them assess the size of the penalties to be imposed on each bank.
However, some observers, such as Geneva lawyer Douglas Hornung, have a different theory. They believe the USDoJ will assume that the destination banks for these asset switches have deliberately solicited them in order to help the clients keep their untaxed assets hidden. These banks will thus become new targets for so-called group disclosure requests issued by the USDoJ, and will in turn be exposed to further criminal investigations.
With the leaver list information, they could identify the banks who actively promoted US tax evasion and thus who should be targets for additional group requests and perhaps even criminal prosecution in the US.
This strategy has already worked once, when UBS was forced to yield up a leavers' list under heavy US pressure. The money trail derived from this list appears to have revealed that much of the departing funds went to Bank Wegelin, which immediately became a target for US investigators. Wegelin had to pay the US authorities a USD58 million penalty and as a result was forced to cease operations earlier this year.
Read more at: Tax Times blog