Swiss Bank Forfeits Over $16 Million Following Tax Evasion Indictment In US

Tom Burroughes

25 April 2012

Wegelin & Co, Switzerland’s oldest bank which also had the unwanted achievement of being the first foreign bank indicted in the US for allegedly helping US tax evaders, has forfeited more than $16 million held in a UBS account.

In an order disclosed to the public yesterday, US District Judge Laura Taylor Swain in Manhattan entered the forfeiture order, covering money seized from a US correspondent account held at UBS in Stamford, Connecticut.

On 2 February, US prosecutors accused Wegelin & Co of helping clients hide more than $1.2 billion in offshore bank accounts. They said the tax fraud conspiracy ran from 2002 and 2011, and involved more than 100 US taxpayers. The indictment was part of a crackdown on alleged tax fraud, including efforts to pierce the tradition of Swiss bank secrecy.

On the same day Wegelin was indicted, the US government filed a forfeiture complaint against the correspondent account it maintained at UBS; it claimed that Wegelin and at least two other Swiss banks used the Stamford account and the funds in it to covertly launder funds held in undeclared accounts in Switzerland.

Following the accusations against it earlier this year, Wegelin & Co – founded in 1741 – broke up, selling its non-US operations into Notenstein Private Bank, a structure created by Swiss-based Raiffeisen, in a move described by the partners of Wegelin as “extremely painful”. The sale is the most dramatic example yet of how the US authorities’ reach is forcing foreign firms to make significant moves to avoid falling foul of US law.

Preet Bharara, the US Attorney in New York, said the forfeited funds will be deposited with the US Treasury.

Wegelin & Co has no branches outside Switzerland, and had followed the common industry practice of using correspondent banking services to handle money for US clients.

“As alleged, Wegelin Bank aggressively solicited business from US taxpayers looking to make an end-run around the tax code. The millions that we forfeited today were used, in part, by the bank to allow their US customers to have it both ways – they could gain access to their hidden funds but still hide them from the IRS. Today’s action should send a clear message that when a foreign bank tries to use the US financial system to launder its dirty money, it will pay the price,” said Bharara.