The Wegelin saga has reached its conclusion with a somewhat unexpected guilty plea:
Switzerland’s oldest bank is to close permanently after pleading guilty in a New York court to helping Americans evade their taxes.
Wegelin, which was established in 1741, has also agreed to pay $57.8m (£36m; 44m euros) in fines to US authorities.
It said that once this was completed, it “will cease to operate as a bank”.
The bank had admitted to allowing more than 100 American citizens to hide $1.2bn from the Internal Revenue Service for almost 10 years.
The Swiss banking industry seems decidedly rattled by the plea and by what the Wegelin partners have said, as demonstrated by this commentary:
The Wegelin story is a sad one. Two very talented bankers – Mr Hummler and Mr Bruderer – destroyed their cherished lifetime project through their unacceptable behavior.
In addition, with their unconsidered comments in front of the judge in New York, they provided new reasons for the US government to go ahead with their actions against Switzerland, complicating life even further for the key negotiator of the Swiss government.
Last, but not least, with their comments they earned anger and disregard from their fellow bankers in Switzerland.
One can argue endlessly about the rights and wrongs of the case and whether this – together with issues like FATCA – demonstrate US regulatory overreach. I have some sympathy with the idea that it does, but that’s irrelevant – the point is that the US is being increasingly aggressive about pursuing what it sees as international tax evasion and other countries with tax shortfalls are increasingly likely to follow in its footsteps.
There are two obvious consequences to this. The first is that tax evasion through hiding money offshore is an increasingly dangerous game and one that investors should avoid.
The other, unfortunately, is that it may become ever more difficult to open accounts outside your home country. Opening international accounts has long been difficult for US investors and FATCA is making that worse. There is the risk that this unwillingness to accept US residents is extended to residents of other countries that take a similar attitude.