RiskFinancial CrimeSwiss Bank Wegelin to Close after US Tax Evasion Fine

Swiss Bank Wegelin to Close after US Tax Evasion Fine

Switzerland’s oldest bank, Wegelin & Co founded in 1741, is to close after pleading guilty to charges that it assisted US taxpayers hide more than US$1.2bn from the Inland Revenue Service (IRS) by providing them with secret accounts.

Otto Bruderer, a managing partner at the St Gallen-based bank, appeared in a Manhattan federal court on 3 January to enter a plea on the company’s behalf on a single charge of conspiracy. “Wegelin was aware that this conduct was wrong,” he told the court. “From about 2002 through about 2010, Wegelin agreed with certain US taxpayers to evade the US tax obligations of these US taxpayer clients, who filed false tax returns with the IRS.”

US attorney Preet Bharara said: “The bank wilfully and aggressively jumped in to fill a void that was left when other Swiss banks abandoned the practice due to pressure from US law enforcement.” This action had included actively wooing US clients away from Switzerland’s largest bank, UBS; which was backed by Wegelin’s senior management. In 2009, UBS agreed to pay a US$780m fine to US authorities related to tax evasion charges and also to reveal details of its US account holders.

Bharara added that it was a “watershed moment in our efforts to hold to account both the individuals and the banks – wherever they may be in the world – who are engaging in unlawful conduct that deprives the US Treasury of billions of dollars of tax revenue”.

Under a proposed plea agreement, Wegelin will pay a total of US$57.8m to the US authorities; comprised of a fine of US$22m, a further US$20m in restitution and US$15.8m representing fees on undisclosed accounts. The agreement requires court approval and sentencing will take place on 4 March.

Wegelin announced later that it “would cease to operate as a bank”. It was first indicted last February, becoming the first Swiss lender charged under the US crackdown on offshore firms suspected of helping US citizens evade taxes. At the time, the bank said that it intended to resist the charges and because it only had branches in Switzerland it was immune from prosecution by the US, adding that its actions were not in violation of Swiss law. It was declared ‘a fugitive from justice’ when its Swiss-based executives failed to appear in court. However, since its indictment Wegelin has been engaged in winding down its business, including a sale of its non-US assets to regional Swiss banking group Raiffesen.

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