US, Switzerland Hammer Out Deal on Secret Bank Accounts

Swiss banking giant UBS has reached a tentative agreement with the U.S. government regarding a tax dispute that, until now, had the pair locked into a legal and diplomatic brouhaha since early this year. The deal, the finer details of which are not yet public, could hold significant tax implications for the more than 52,000 Americans who hold accounts with the secretive Swiss bank.

This is a sudden reversal from the position taken by the two sides this past Wednesday. At that time, attorneys for both the bank and the government told the federal judge overseeing the matter that talks had hit an unspecified “stumbling block.” Today, however, an attorney from the U.S. Department of Justice said that a final settlement was expected within a week, noting that the two parties have reached “an agreement in principle on major issues,” with but a few other, smaller, issues left to resolve. In a press conference today, he said that a final, signed accord should be ready by August 7.

The announcement coincides with a meeting between Secretary of State Hilary Clinton and Swiss Foreign Minister Micheline Calmy-Rey.

The U.S., in an effort to crack down on offshore tax evasion, has been demanding that UBS release the identities of its American clients, a move that has, so far, been vigorously resisted, as doing so would leave the bank open to prosecution by Swiss authorities. Switzerland has extraordinarily strict financial secrecy laws, the breaking of which leading potentially to a prison sentence. While the Swiss developed the infrastructure of its modern secrecy laws in the 1930s, their attitudes on financial privacy go as far back as the medieval era.

UBS, accused of actively helping wealthy Americans evade taxes, avoided criminal prosecution this past February through a $780 million settlement, though this was followed immediately by a civil suit by the IRS demanding the disclosure of the 52,000 account holders that are the subject of the deal reached today.