Swiss Secrecy Laws: In UBS Case, a Swiss Diss?

[WSJ Law Blog]

You don’t upend a highly-profitable and centuries-old system of doing business overnight, now do you?

That’s one takeaway from the news out Thursday that the Swiss government is backpedaling a bit on an agreement to hand over to the U.S. the names of some 4,450 UBS client names. That agreement was reached in the wake of a lawsuit filed by the U.S. Justice Department, following during months of intense negotiations. Click here for the NYT story.

The announcement came after two Swiss courts ruled that the disclosure of client names would be illegal because it would violate the country’s secrecy laws. Click here for an LB item on that, from Monday.

The Swiss cabinet said in a statement that it would continue talks with the United States on the matter. That said, reports the NYT, there was also a risk that the United States would resume civil proceedings filed against UBS in a Florida court last year.

IRS officials are, not surprisingly, not so pleased. The agency said Wednesday that Switzerland needed to hew to the August deal. “We expect the Swiss government to continue to honor the terms of the agreement,” the agency said in a statement. The Justice Department declined to comment.

“The Swiss right now need to do their Swiss thing — they’re trying to find a creative way to get this thing done,” said a top American government official who was not authorized to comment publicly on the matter.

Part of what’s going on, according to the NYT, involves a difference between nations on the definition of “fraud.” The Swiss, it seem, distinguish between not paying taxes, which is not regarded as a crime, and tax fraud, “which is regarded as a crime but involves ill-gotten gains from activities like money laundering or the deliberate falsification of documents.”

In a statement, UBS said that it “welcomes the fact that the Swiss Federal Council is pursuing a dialogue with the U.S. authorities.”

“UBS’s new management will fully support the search for a solution,” it added. “As before, we will fulfill all our commitments under the agreement.”