International Business Law Advisor : Miami International Business Lawyer & Attorney : Santiago Cueto Law Firm : Florida and Global Business Litigation

 James Bond , Jason Bourne and other international icons of intrigue may soon need to look elsewhere to keep their secret bank accounts. A Swiss parliamentary committee recommended yesterday that the full Parliament back an agreement with the United States to hand over the bank details of UBS’ 4,450 American clients in spite of Switzerland’s long-standing bank secrecy laws.

The Parliament will vote later this month on whether to permit Switzerland to make the disclosure. The vote would effectively end Switzerland’s storied history as a secret money haven.

Although the Swiss government agreed in August 2009 to share some details of secret Swiss accounts to end a dispute, a Swiss court ruling in January blocked that accord. Support for the deal in the Swiss Parliament would avert the risk of new tax litigation against UBS.

The Swiss are well aware of the high stakes in the UBS case. Failure to back the settlement would probably reopen the U.S. government’s lawsuit against UBS. Ultimately, the bank’s license in the United States could be revoked.

The UBS tax controversy was part of a scathing report issued by the Swiss Parliament into the Swiss government’s handling of the credit crisis. The report is an interesting read and embedded in its entirety below (Scroll down to page 10 to skip to the UBS tax controversy):

Swiss Parliament Report on UBS

Does all this spell the end of Swiss banking? Hardly. Despite the recent changes, the Swiss banking sector will remain one of the world’s premiere financial centers due to its skilled pool of managers, currency stability and low taxes. In a new age of transparency, Switzerland is sure to thrive (not so much with the secret agent crowd).

  -Santiago

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on my visit to Switzerland with my wife and daughter this past April, there was a palpable sense of uneasiness in the unusually damp alpine air. As we made our way down Zurich’s Bahnhofstrasse---the main artery running through the city’s financial district, I could not help but notice the sheer number of jaw-clenched bankers passing us by. Given the current regulatory climate, the bankers' uneasiness is understandable. As Mark Scott of Business Week’s Europe Insight blog explained in his post U.S. May Target Other Swiss Banks in Tax Probe, Swiss bankers are coming under intense scrutiny concerning the portfolios of their  wealthy U.S. clients:

Swiss banks also are becoming more reticent towards U.S. clients. Several bankers, who declined to give their names due to the sensitivity of the topic, say the extra oversight involved in managing American money -- coupled with the bad publicity associated with the UBS case -- has taken the shine off providing wealth management services to U.S. high-earners. Despite the sizeable American market, many would prefer to tap the growing wealth from Asian economies, instead of dealing with the added pressure associated with U.S. clients.”

Although I touched on this topic in an earlier post, it remains to be seen whether Swiss banks will continue to limit or even eliminate private wealth services to U.S. clients.  Due to the ongoing saga between the IRS and UBS, many Swiss banks have chosen to shut out U.S. clients entirely.  At present, it's mostly the smaller Swiss banks that have announced their intent to limit their services to non-U.S. clients. Wegelin & Co., Switzerland's oldest bank,  for example, has instructed wealthy clients to sell their U.S. assets, or switch banks, because of concerns that new rules will burden investors with tax obligations in the U.S. At least two of the major Swiss banks -- Julius Baer (JBHGF) and Credit Suisse Group (CS) -- have yet to publicly announced whether or not they will change their procedures for handling U.S. clients. 

As this banking saga continues to unfold, it will be up to Switzerland to draw the line on banking reform. Swiss foreign minister MichelineCalmy-Rey put it succinctly when she told Reuters, "For us this is not primarily about UBS. It is about Switzerland's sovereignty. We want our laws to be respected. It is also about our financial center and about jobs. A solution in the UBS case must fall within Swiss laws."

 Trend to Watch: Look for increased tension between Switzerland and other nations as France and Germany step up their efforts to further erode Swiss bank secrecy laws.

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