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14 Jun, 2013 10:23

‘American dictate’: Swiss Parliament split on banking secrecy law

‘American dictate’: Swiss Parliament split on banking secrecy law

The Swiss parliament has only a week left to vote on a bill which would end years of banking secrecy and allow Americans access to tracking account information. Now a parliamentary committee has recommended the lower house ditch the debate.

The US is pressing the world’s largest offshore financial center, with an estimated $2 trillion in equities and assets, to come clean with their banking secrecy or face up to $10 billion in claims.

Earlier this week a lawmaker likened the decision to a “choice between the plague and cholera”, Reuters reported.  

If the lower house follows the recommendation, and doesn’t debate the draft law, or, even rejects it before the summer session adjourns on June 21, the US may take criminal action against Switzerland for allowing tax evasion.

Lawmakers often follow committee advice, but it wouldn’t be unprecedented if they reject it.

On Wednesday, the bill stayed alive after the upper house voted in favor 24 to 15, with one abstention.

The legislation, which has been dubbed by some Swiss media outlets as the ‘American dictate’, is a strong demand by the US for Switzerland to end banking secrecy and bring transparency to their banking secrecy practices which have been written into law since 1934.

Swiss Finance Minister Eveline Widmer-Schlumpf leaves the Council of State for a break during a debate on the tax agreement between Switzerland and the U.S. in Bern June 12, 2013. (Reuters / Ruben Sprich)

Over a dozen Swiss banks are currently under formal investigation by the US, including Credit Suisse, Julius Baer, and the Swiss branch of HSBC.

The US pressure mounted in 2009, when Switzerland’s biggest lender, UBS, admitted to helping 52,000 American clients avoid taxes. The bank narrowly escaped prosecution in exchange for handing over 5,000 client names and paying a $780 million fine. 

Luxembourg announced its plans to end banking secrecy in mid-April, but the obstacles in the Swiss Parliament indicate the small alpine nation won't follow suit.

On the Luxembourg news, President Ueli Maurer defended Swiss banking secrecy, telling reporters he saw "no need to change strategy".

In January Switzerland’s oldest private bank, Wegelin & Co, said it would close down for good after over 250 years of service, following its guilty plea to charges of helping prosperous Americans hide more than $1.2 billion from the Internal Revenue Service through secret accounts.

Last week members of the lower house halted their vote on the legislation, unprepared to pass legislation they deemed too ‘vague’.

Swiss Finance Minister Eveline Widmer-Schlumpt has voiced her support of the bill.

"This is both a good and a practical solution," Widmer-Schlumpf told reporters after a cabinet meeting approved the draft accord.