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The Historic US Indictment of The Swiss Wegelin Bank Lays The Foundation For Additional Cases

  Sanjiv Gupta CPA  Published 
The Historic US Indictment of The Swiss Wegelin Bank Lays The Foundation For Additional Cases

Wegelin and Co. was the oldest private bank in Switzerland but they were unable to escape US indictment. They became the first non-US bank to be indicted by the US government because they facilitated tax evasion by US taxpayers. They were accused of conspiring to hide $1.2 billion dollars from the US Internal Revenue Service.

A key to the case was a Wegelin correspondent account held in Connecticut at a UBS branch. These correspondent accounts are held by banks at another bank to handle the financial intuitions transactions with each other. The United States Justice Dept. alleged that the account held by Wegelin did not have that legitimate purpose.

Although Wegelin did not have a physical location in the US, it used its UBS account so its United States customers could access their Swiss held funds. The Wegelin indictment alleged that millions flowed through the account to US citizens who were evading taxes. A default was entered against Wegelin and they were ordered to forfeit $16.2 million from the correspondent account.

Only days before the indictment was returned, the bank was dissolved by the owners. Their operations and assets were sold to the Raiffeisen Bank in Switzerland. Wegelin now only exists to finalize United States relationships with clients and to negotiate with the United States Justice Department. The correspondent account is alleged to be used by 2 or more other Swiss banks for the same purpose.

This indictment was ground-breaking for the United States. Since this case, the United States has begun to intensify the legal pressure they put on financial institutions in Switzerland. The Swiss and the Americans have not been able to reach an agreement on the disclosure of US account holders.
Wegelin is said to have recruited US clients that were leaving UBS in 2008 when there was news of tax fraud at USB. Wegelin saw this as a great business opportunity. Managers were instructed to approach customers and tell them about an alternative that was safe for tax evaders.

In late 2011, Wegelin did not take any more new customers from the US but it was too late by then to avoid the Justice Department’s scrutiny. Their illegal conduct became apparent when the IRS put forth the Offshore Voluntary Disclosure Initiative.

The smaller banks in Switzerland are still not affected by United States enforcement efforts. However, the United States can target any Swiss banks with correspondent accounts in the US. There are many jurisdictional issues that still have to be answered.