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Swiss bank Wegelin to close after US tax evasion fine Swiss bank Wegelin to close after US tax evasion fine
(35 minutes later)
Switzerland's oldest bank is to close permanently after pleading guilty in a New York court to helping Americans evade their taxes.Switzerland's oldest bank is to close permanently after pleading guilty in a New York court to helping Americans evade their taxes.
Wegelin, which was established in 1741, has also agreed to pay $57.8m (£36m; 44m euros) in fines to US authorities.Wegelin, which was established in 1741, has also agreed to pay $57.8m (£36m; 44m euros) in fines to US authorities.
It said that once this was completed, it "will cease to operate as a bank".It said that once this was completed, it "will cease to operate as a bank".
The bank had admitted to allowing more than 100 American citizens to hide $1.2bn from the Internal Revenue Service for almost 10 years.The bank had admitted to allowing more than 100 American citizens to hide $1.2bn from the Internal Revenue Service for almost 10 years.
Wegelin, based in the small Swiss town of St Gallen, started in business 35 years before the US declaration of independence.Wegelin, based in the small Swiss town of St Gallen, started in business 35 years before the US declaration of independence.
It becomes the first foreign bank to plead guilty to tax evasion charges in the US.It becomes the first foreign bank to plead guilty to tax evasion charges in the US.
Other Swiss banks have in recent years moved to prevent US citizens from opening offshore accounts.Other Swiss banks have in recent years moved to prevent US citizens from opening offshore accounts.
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."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."
The closure of Wegelin is a watershed moment that has huge implications for the Swiss banking industry - and for Switzerland's famed banking secrecy.The closure of Wegelin is a watershed moment that has huge implications for the Swiss banking industry - and for Switzerland's famed banking secrecy.
Wegelin's guilty plea included the admission that it intentionally opened accounts for US citizens to help them avoid tax.Wegelin's guilty plea included the admission that it intentionally opened accounts for US citizens to help them avoid tax.
In court Wegelin's managers said they knew it was wrong, but thought they would not be prosecuted because it was legal in Switzerland, and common practice in Swiss banking - words which are causing something close to panic among other Swiss banks, including Credit Suisse, who are also being investigated by the US authorities.In court Wegelin's managers said they knew it was wrong, but thought they would not be prosecuted because it was legal in Switzerland, and common practice in Swiss banking - words which are causing something close to panic among other Swiss banks, including Credit Suisse, who are also being investigated by the US authorities.
Until now everyone expected Wegelin to fight the charges - instead Switzerland's oldest bank will cease to exist.Until now everyone expected Wegelin to fight the charges - instead Switzerland's oldest bank will cease to exist.
The message to the Swiss financial sector is clear - the US will not give up this fight over tax.The message to the Swiss financial sector is clear - the US will not give up this fight over tax.
The Swiss government has been trying for months to negotiate a deal with the US which would protect Switzerland's banking secrecy.The Swiss government has been trying for months to negotiate a deal with the US which would protect Switzerland's banking secrecy.
The Wegelin case makes that look virtually impossible.The Wegelin case makes that look virtually impossible.
He 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".He 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".
Otto Bruderer, a managing partner at the bank, admitted that Wegelin had sheltered US clients from tax between 2002 and 2010, and said it was aware that its conduct had been "wrong".Otto Bruderer, a managing partner at the bank, admitted that Wegelin had sheltered US clients from tax between 2002 and 2010, and said it was aware that its conduct had been "wrong".
Inevitable demise
Wegelin effectively ceased to function as a Swiss bank almost a year ago.
US criminal accusations against three of its executives prompted the bank to hurriedly sell off its core Swiss and other non-US businesses in January 2011 in order to protect them from the fall-out of any legal battle.
The businesses were bought by Raiffeisen Bank, Switzerland's co-operative bank, which has since severed the few business ties that it had with the US.
The sale left Wegelin responsible only for its American clients, including those at the centre of the US authorities' probe.
Wegelin as an institution was itself indicted by US authorities in February last year, and then declared a fugitive from justice when the bank's executives failed to appear in a US court.
The bank had vowed to fight the charges, claiming that because it only had branches in Switzerland, it was bound only by its home country's relaxed banking laws.
Its decision to cave in, and wind down its one remaining business, has made the bank's demise inevitable.
'Aggressively pursuing''Aggressively pursuing'
After Wegelin was first indicted by US authorities in February last year, it was declared a fugitive from justice when its executives failed to appear in a US court.
The US accusations prompted the bank to sell off its Swiss and other non-US businesses to Raiffeisen Bank - Switzerland's co-operative bank - early last year in order to protect them from the fall-out of any legal battle.
Wegelin had vowed to fight the charges, claiming that because it only had branches in Switzerland, it was bound only by its home country's relaxed banking laws.
Jeffrey Neiman, a former US federal prosecutor who was involved in a previous investigation into Swiss banks, said: "It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts.Jeffrey Neiman, a former US federal prosecutor who was involved in a previous investigation into Swiss banks, said: "It is unclear whether the bank was required to turn over American client names who held secret Swiss bank accounts.
"What is clear is that the Justice Department is aggressively pursuing foreign banks who have helped Americans commit overseas tax evasion.""What is clear is that the Justice Department is aggressively pursuing foreign banks who have helped Americans commit overseas tax evasion."
It remains to be seen whether US authorities will continue with, or drop, parallel charges against three Wegelin bankers, Michael Berlinka, Urs Frei and Roger Keller.It remains to be seen whether US authorities will continue with, or drop, parallel charges against three Wegelin bankers, Michael Berlinka, Urs Frei and Roger Keller.
It is also unclear what implications Wegelin's admission of guilt may have for the bank's directors, who have direct personal liability for the bank's liabilities, and who are headed by Konrad Hummler, the chairman of the leading Swiss newspaper Neuer Zuercher Zeitung.
The Wegelin case comes four years after a far larger Swiss bank, UBS, agreed to pay a $780m fine to US authorities related to tax evasion charges. UBS also agreed to reveal the details of US account holders.The Wegelin case comes four years after a far larger Swiss bank, UBS, agreed to pay a $780m fine to US authorities related to tax evasion charges. UBS also agreed to reveal the details of US account holders.
However, UBS neither pleaded nor was found guilty. Instead it and US prosecutors came to what is called a deferred prosecution agreement, with the fine being paid in exchange for the charges being dropped.However, UBS neither pleaded nor was found guilty. Instead it and US prosecutors came to what is called a deferred prosecution agreement, with the fine being paid in exchange for the charges being dropped.
Switzerland's other major bank, Credit Suisse - with over a billion dollars in total assets and another billion in clients' money - remains under investigation by the US authorities, as does another high profile bank, Julius Baer, which is about a fifth of the size of Credit Suisse, as well as a number of local cantonal banks. Switzerland's other major bank, Credit Suisse - with over a billion dollars in total assets and another billion in clients' money - remains under investigation by the US authorities, as does another high profile bank, Julius Baer, which is about a fifth of the size of Credit Suisse, as well as 11 other mainly local, cantonal banks.
Do you bank with Wegelin? What will you plan to do now? Please share your comments and experiences.Do you bank with Wegelin? What will you plan to do now? Please share your comments and experiences.