U.S. Privacy Invasion Grabs Offshore Banking

The demand for corporate reform by Americans combined with Congressional election year fears and heightened government privacy invasions in the United States have finally come to rest in the judicial branch of the federal government. For centuries, Swiss banks have been a haven of secrecy to the world. With the help of the U.S. judiciary, the U.S. government is a step closer to removing the band of secrecy from the Swiss and offshore banking.

Simply put, the federal government via the Internal Revenue Service wants to collect taxes and is tired of foreign tax evasion. A federal judge in Miami issued an order allowing the Internal Revenue Service to forcibly retrieve information from UBS about U.S. taxpayers who may be using Swiss accounts to evade income taxes.

To avoid a market reaction, the judgment was issued after the close of U.S. markets today and in close proximity to a national holiday. UBS must produce records identifying U.S. taxpayers with accounts in Switzerland.

United States law requires any U.S. taxpayer to report all financial accounts in a foreign country if the total value of the accounts exceeds $10,000. Failure to report a foreign account will lead to a penalty of up to 50 per cent of the amount in the account at the time of the violation.

This is the first time that U.S. government has managed to authorize a request of this kind over a foreign bank. The move is likely to spur a confrontation with authorities in Switzerland. Swiss law provides that banks cannot disclose confidential information without client approval.