The US Justice Department is turning the screw on Swiss banks to force them to hand over information about their American taxpayer clients.
After a wave of prosecutions that have seen one bank close and UBS and Credit Suisse pay around $3.5 billion in fines for illegally aiding Americans to evade tax, prosecutors are now turning their attention to other banks.
The justice department has offered 100 banks settlement terms to avoid prosecution in return for complete details of all their dealings with US taxpayers.
Another 14 banks are under the shadow of court proceedings because prosecutors started investigations before offering the other banks some degree of immunity.
As a result of constant hounding by the US and tax authorities in the UK, France, Germany and Austria, Swiss banks have torn down the veil of secrecy traditionally shrouding their financial dealings with clients.
The government has also taken the huge step of signing up to the US Foreign Account Tax Compliance Act (FATCA) that demands they report financial details of their US taxpayer clients each year.
FATCA compliance will cover future years, but the bad boys of Swiss banking still have to account for their past sins.
Now, 10 months in to the settlement period, the banks are stalling about handing over details about their US clients as much as they can.
In response, the justice department has categorised the banks by levels of perceived wrongdoing.
The settlement does not involve a court hearing or guilty plea. Banks must merely provide the evidence of their past misdemeanours and pay penalties that match them.
Banks with secret offshore accounts for US taxpayers open before April 1, 2008, must pay a levy of 20% of the total value of the accounts.
US taxpayers in firing line
The penalty rises to 30% of the value of any accounts opened after that date but before March 2009.
Secret accounts opened after March 2009 come with a 50% penalty payment.
“US taxpayers who have failed to declare their Swiss bank accounts or investments should be in no doubt that their banks are going to give them up,” said a Treasury spokesman.
“Just because the bank pays a penalty does not mean the Internal Revenue Service (IRS) will not be chasing these taxpayers for not declaring their overseas earnings.
“Our advice is if you are a US taxpayer and need to bring your tax affairs up-to-date, contact the IRS as soon as possible to gain the best terms for settlement.”