By Patrick Temple-West and Katharina Bart
WASHINGTON/BERN (Reuters) - The United States and Switzerland have struck a deal to allow some Swiss banks to pay fines to avoid or defer prosecution over tax evasion by their U.S. customers, moving closer towards ending a long-running dispute.
The deal will apply to about 100 second-tier Swiss banks, which could have to disclose some previously hidden information and face penalties of up to 50 percent of assets they managed on behalf of wealthy Americans.
But it does not cover banks already under U.S. criminal investigation, which include some of Switzerland's biggest banks such as Credit Suisse and Julius Baer.
The deal is a step forward in a long-running U.S. drive to pierce the shroud of Swiss bank secrecy, though analysts said it was too early to say how much the Swiss banks would have to pay or how much extra revenue would flow to the United States.
"On the whole it's a pretty strong agreement," said Heather Lowe, director of government affairs at anti-graft watchdog Global Financial Integrity, though she said there were "gaps", such as whether banks could settle without turning over U.S. client names. "That is definitely one open question here."
Swiss privacy laws have helped to make the Alpine country the world's biggest offshore financial center. But a crackdown on tax evasion by U.S. authorities in particular had led it to the negotiating table in a bid to lift the uncertainty over potential fines and even indictments for its banks.
UBS, Switzerland's biggest bank, reached a landmark $780 million settlement with U.S. authorities in 2009 after admitting it sheltered U.S. tax cheats, providing information that has contributed to a criminal investigation currently focused on 14 other banks.
Switzerland's oldest bank, Wegelin & Co, was indicted earlier this year and announced its closure, underscoring the risks for Swiss financial institutions.
"It's a choice between two evils (for Swiss banks)," said Walter Boss, a tax lawyer with Poledna Boss Kurer AG in Zurich.
"If they don't cooperate with the U.S., the U.S. might indict them."
U.S. Attorney General Eric Holder hailed Thursday's deal: "The program's requirement that Swiss banks provide detailed account information will improve our ability to bring tax dollars back to the U.S. Treasury from across the globe."
The Swiss government, meanwhile, said the settlement provided a framework for cooperation while respecting Switzerland's legal system and sovereignty.
Under the program's penalty provisions, a Swiss bank seeking a non-prosecution agreement must agree to a penalty equal to 20 percent of the total dollar amount of all hidden U.S. customer accounts held by the bank on August 1, 2008.
That was roughly when the United States started cracking down on tax avoidance by Americans with secret Swiss accounts.
The penalty amount increases to 30 percent and then to 50 percent, depending on how active a bank was in continuing to open secret accounts for Americans after the crackdown began.
"The fines in particular are at the upper end of legally acceptable and economically bearable levels," the Swiss Bankers Association (SBA) said in a statement.
"It is, however, the sole remaining solution for enabling the banks to resolve the legal problems with the U.S. conclusively, and for creating legal certainty."
The SBA also flagged what it called "certain ambiguities in the program" which would need to be discussed between the U.S. Justice Department and the banks to enable the banks to implement the program.
The program, which is not available to individuals, also requires cooperating banks to tell prosecutors about Americans' assets that left Switzerland and were moved to other tax havens.
The Swiss government did not give any information about the banks still under U.S. investigation, which also include the Swiss arm of Britain's HSBC, privately held Pictet, and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank.
Several of these banks have said they are preparing information on client withdrawals as demanded by U.S. investigators, after the Swiss government said it would allow them to circumvent secrecy and privacy laws to do so.
At 0950 GMT, Credit Suisse shares were down 1.2 percent at 27.01 Swiss francs, with Julius Baer's down 0.9 percent at 41.32 francs. The European bank index was off 0.3 percent.
(Additional report by Martin da Sa'Pinto in Zurich. Editing by Kevin Drawbaugh, Gary Hill, Matthew Lewis, Ken Wills and Mark Potter)
- Crime & Justice