Swiss Parliament Must Agree to Turn Over Names of UBS Clients
June 8th, 2010
June 8th, 2010
The lower house of Swiss parliament on Tuesday rejected a plan to turn over to the United States the names of thousands of UBS customers. The vote threatens the historic agreement reached last summer which aims to strike a heavy blow to banking secrecy in one of the most notorious offshore banking centers.
The agreement to turn over the roughly 4,450 names to U.S. officials was originally reached in a bilateral deal last summer, however a Swiss court has since ruled that the accord must be approved by the Swiss legislature before it can go into effect. The UBS agreement has become something of a political quagmire in the lower house, with the Social Democrats making their support conditional upon other issues such as limits on banker’s bonus payments and banking regulations. Others in parliament want to submit the deal to a public referendum, a lengthy process which would further frustrate progress.
Having passed the upper house of the legislature, the deal is not dead yet. It will now move on to a reconciliation committee where members of both houses will have to reach a compromise. If their final position is to reject their end of the agreement with the U.S, then UBS could face a serious backlash.
The Financial Times today writes, “…privately, [U.S.] officials have made clear that Washington would not tolerate any changes to the original deal, requiring Switzerland to transmit the 4,450 UBS client names in August. “
Sen. Carl Levin (D-Mich.) issued a vehement call for action today when he said:
“The United States should reject any further attempts by the Swiss to delay the UBS case. It is time to move forward with the summons in court and force UBS to provide the names and account information for all 52,000 suspected U.S. tax cheats. This travesty underscores the need for legislation that I’ve introduced which, among other measures, would empower the U.S. Treasury Secretary to take action against any foreign bank or jurisdiction that impedes U.S. tax enforcement by, for example, prohibiting U.S. banks from accepting wire transfers or honoring credit cards from the foreign bank facilitating U.S. tax evasion.”
As Swiss lawmakers go to committee in a final attempt to resolve the impasse, the threat of U.S. legal action against UBS will likely influence their debate.
Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity, said, “UBS could be facing a very sizeable judgment against it down the road if the Swiss Parliament isn’t willing to sanction the settlement agreements.”
Lowe said that the U.S. should be able to reinstate the civil and criminal cases which the agreement was meant to settle, and U.S. courts could freeze UBS’s U.S.-based assets to satisfy a judgment against it.
The current session of parliament will conclude on June 18. If the divided parliament resolves to uphold the agreement, then they will make history in scoring a landmark victory against banking secrecy. If not, then the U.S. won’t hesitate to respond. Until then, the eyes of the world are directed at Bern.