Berlin, Jan. 5: The US was accused of “gunboat diplomacy” in Switzerland on Friday for causing the closure of the country’s oldest private bank, which pleaded guilty to helping American clients to hide $1.2 billion from the tax authorities.
A chill went through the secretive world of Swiss banking when Wegelin & Co, founded in 1741, said that it would cease trading once it had settled fines and forfeits totalling $57.8 million for concealing funds from the US Internal Revenue Service.
Wegelin has effectively been in limbo for a year during the court case in New York after selling all its non-American business to Raiffeisen, the third-largest banking group in Switzerland, last January.
The loss of one of Switzerland’s 13 private banks sent shock waves through the Alpine state and brought a rueful admission that it can no longer resist the pressure to clean up its banking practices.
The Wegelin case comes four years after UBS agreed to pay a $780 million fine to American authorities in relation to tax evasion charges and agreed to reveal details of American account holders.
Unlike Wegelin, however, UBS neither pleaded nor was found guilty, but came to a deferred prosecution agreement, with the fine being paid in exchange for the charges being dropped.
Credit Suisse, Switzerland’s other leading bank, remains under US investigation, as does Julius Baer and eight other local banks.
“It seems almost tragic that the offshore business with American customers, which sealed the fate of the bank, was never of strategic importance to it,” the Neue Zurcher Zeitung wrote on Friday.
The board of the daily newspaper is chaired by Konrad Hummler, managing director of the doomed bank and a vociferous campaigner for Switzerland to stand up for its traditional banking rights.
The bank’s partners made more than Swiss Francs 100 million from the sale to Raiffeisen and so will be able to meet their personal liabilities from the US fines, the newspaper said.