The secrecy dam of Swiss banking is finally breaking.
As part of a $780 million settlement with the U.S. Internal Revenue Service, Switzerland's largest bank, UBS, is going to release the names of Americans who hold secret bank accounts. It isn't known how many names are being released but the IRS wants about 19,000 of them.
"The Swiss are saying that this is the end of Swiss banking as they knew it," Jack Blum, an offshore tax specialist, told The New York Times.
To be sure, the Swiss are known for their sophisticated and fastidious banking so trustworthy and discreet that it is respected the world over. But let's face it, their famous confidentiality has led to some fairly dirty stuff.
Swiss banking is built on two majors, UBS and Credit Suisse, plus about 400 smaller banks that can handle just a few well-heeled clients. The system is quirky because there are no government guarantees, in part to keep matters secret. The tradition of banking competence dates back to the revocation of the 1685 Edict of Nantes which was a major step in the history of bank de-regulation.
Secrecy dates to the Swiss Banking Act of 1934 which was prompted by a French scandal in which prominent Frenchmen were accused of hiding their money in private Swiss accounts. The list included the Peugeots of automobile fame and perfume mavenFrancoise Coty. About that time, Swiss accounts became popular with wealthy German Jews facing Nazi anti-Semitism and wanting to protect their money.
But the secrecy has led to some major controversies. Among them:
- American gangster Meyer Lansky, not wanting to get nailed on IRS charges like Al Capone, used Swiss accounts to hide his money in the 1930s.
- After World War II, members of the Nazi party used Swiss accounts for their funds as they fled war crime prosecution.
- The Vatican Bank, accused in class action lawsuit mishandling money in World War II, used Swiss accounts.
- Trying to return assets of Jews killed in the Holocaust, the World Jewish Congress, plus some American officials, ran into a stone wall of Swiss bank secrecy when they tried to sort things out and win some retribution for concentration camp survivors. Details are in the book "The Victim's Fortune, Inside the Epic Battle over Debts of the Holocaust" by Financial Times reporters John Authers and Richard Wolffe.
- The U.S. government believes that Swiss banks helped shield the money of Osama Bin Laden when they investigated his role in the Sept. 11, 2001 terrorist attacks that killed 3,000 Americans.