There used to be a joke at Wegelin - the oldest banking establishment in Switzerland - that the only two ways of leaving the bank as a relationship manager was retirement or death. I'm afraid taxes got them first!
The closure of Wegelin is a significant event in the ongoing battle between Switzerland and global tax authorities, which started back in 2007 after an American banker based in Geneva provided protected
client data for the review of US tax authorities. Wegelin is one of eleven banks under investigation by the authorities. The bank was previously heralded by many as a model of Swiss traditional private banking. Their unlimited liability partnership model meant
that clients felt safer with them and they stood for long term trust and security. The fact that a small percentage of their assets under management were held by Americans who were hiding their assets from the IRS has led to their premature end.
Over the last five years, we have seen a series of events including data theft, financial penalties and individual charges of tax evasion. If anything, Wegelin symbolises the reality that banks will need to ensure they are compliant with tax authority rules.
This includes FATCA and the bilateral tax treaties agreed with the UK and Austria and which are also in discussion in Germany and elsewhere. In a business which is based on trust and security, Switzerland’s banks must be pro-active in managing their client
relationships. This investment has already cost the industry millions in changes to processes and systems, but the penalty for non-compliance - as seen by what has happened at Wegelin - could be even higher.
As they say, nothing is more certain than death and taxes.