Tax Relationship between the United States and Switzerland

Discussion on Tax Relations between the United States and Switzerland; Where they’ve been, Where They Are and Where They Are Going Erin McClarty

I. Introduction II. History III. How Switzerland Enforces Bank Secrecy A. What Bank Secrecy Covers B. The Domestic Enforcement of Swiss Bank Secrecy C. The Enforcement of Bank Secrecy in Foreign Investigations IV. Limitations to Bank Secrecy V. Past Agreements Between the United States and Switzerland on Information Exchange A. 1996 Tax Information Exchange Agreement B. The 2003 Tax Information Exchange Act C. Other Notable Agreements VI. The U.S.-Swiss Protocol of September 2009 A. Environment Surrounding the Change B. The Effect the New Agreement will Have on Information Exchange VII. The Debate VIII. What Lies Ahead IX. Conclusion

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I. Introduction Private banking and investment comprises an enormous piece of Switzerland’s economy; totaling 11 percent of its gross domestic product and 12 percent of its total tax income.1 With one of the largest stakes in the private banking sector, over one-third of all cross-border private banking is managed by the Swiss.2 Moreover, with what are arguably the strictest banking laws in the world, it was at one time nearly impossible to get the account information of foreign or domestic clients holding Swiss accounts, save a few limited circumstances.3 This reputation for the utmost confidentiality and protection has allowed Switzerland to gain the confidence of individuals and companies from all over the world. Oddly enough, Switzerland’s strength, resilience, and enormity in banking is, in large part, attributable to bank secrecy laws that have been evolving for centuries.

But such notoriety comes at a cost; the highest being Switzerland’s recent designation as a tax haven by various watch-dog organizations. On top of that, Switzerland’s relationship with the international community have become increasingly frustrated, particularly with developed countries such as the United States. Citing its lean regulation on general tax issues, and iron-clad protection of consumer privacy, countries have begun to vocalize a belief that Switzerland is choosing to prosper and capitalize on behavior attributed to the decay of economies all over the world. The statistics prove such frustrations to be understandable. Though the number of tax havens is numerically small, those in existence have an enormous impact on the world’s economy. Half of the world’s trade goes through tax havens, even though the economies of these havens account for only three precent of the world’s gross domestic product (GDP).4 The value

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of assets held offshore, and subject to little or no taxation, is estimated to be least 11 trillion dollars, one third of the worlds annual GDP.5 Between the release of these statistics, and the recent release of various studies pertaining to off-shore accounts, countries are quickly beginning to realize the staggering effect that tax fraud, and the lack of information exchange, can have on domestic and international economies.

Realizing that there is a void in the governance of international information exchange, savvy criminals are beginning to capitalize on this oversight by using it to their advantage. A recent study by the OECD found that some criminals avoid the application of anti-money laundering measures by opening accounts in countries known as tax-havens. If caught, the criminals claim the offense is the evasion of taxes because such an offense does not carry criminal penalties in Switzerland, the Cayman Islands, Luxembourg, Austria, Liechtenstein and other countries known for strict bank secrecy laws.6 Consequently, there has been a major push for the enactment and enforcement of international guidelines on information exchange, particularly as pertains to tax and securities laws. In 2009, cross-border cooperation on issues such as, transparency, information exchange, tax evasion and tax regulation were forefront. Countries all over the world were emphatically pressuring those designated as tax-havens to change the procedures and processes involved in secrecy law to allow for more transparency. No one has felt this pressure more than Switzerland, who had more tax legislation signed in the last 10 months then there has been in the past 10 years.7 In the following paper I will do a brief survey of Switzerland’s bank secrecy laws, discussing recent changes that have occurred due its recent concessions on information in

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response to international pressure. Over the past ten years, there have been dozens of agreements and protocols signed between Switzerland and various countries; many dealing specifically with information exchange. Consequently, for the sake of brevity, and conciseness, I will demonstrate the changing trends in Switzerland, on information exchange, by discussing the relationship between Switzerland and the United States. Particular focus will be paid to events and agreements dealing information exchange as they pertains to tax and security governance.

First, I will discuss the history of Switzerland’s bank secrecy law; how it came to be, and how it has evolved over the years. Next, I will discuss the mechanisms Switzerland uses to enforce its bank secrecy laws both within and outside of its borders. I will also, briefly, discuss how the Swiss government ensures that bank secrecy is preserved when investigations are conducted by foreign countries. Having discussed how the laws are enforced, I will then discuss how the Swiss government places checks on those laws and investigations. Though broad, the premise of secrecy is not unlimited, and there are a few instances in which disclosure may be compelled. Then, I will do a brief survey of previous agreements between the United States and Switzerland that have been enacted specifically for the purpose of combating tax evasion. There will be a brief discussion on agreements that were not made specifically with tax issues in mind, but do deal with information exchange, and consequently, have been used for tax purposes. After discussing the previous agreements, I will discuss the implications of a recent agreement between Switzerland and the United States. Lastly, I will conclude by briefly discussing why there is a debate as to this issue of “bank secrecy” and what what effect the recent events will have on the future of combating tax evasion.

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II. History The Swiss banking system has been in existence, and actively evolving, for well over three centuries. Originally, bank secrecy began when the Swiss sought to keep Huguenots fleeing from France from being identified in the eighteenth century. 8 Incidentally, this is when the first private Swiss bank began operating as well. Bank secrecy laws then became more defined during World War I, when the Swiss endeavored to protect fleeing Jews 9 from Nazi Germany’s attempts to find out their identities via bank records. 10 After the War, and throughout the 1930’s, not only did Jews continue depositing money in Swiss accounts, but German citizens began depositing money outside of Germany as well.11 This became such a problem, that the Nazi government began to require all German citizens to declare where their assets were.12 Those who were found to have exported assets, and did not declare them, were executed. 13 What is now known as modern day bank secrecy law, was created in 1934, when bank secrecy practices were codified in the Swiss Federal Banking Act of 1934. 14 Shortly after its enactment, banking law were broadened under the Law Concerning the Protection of the Swiss Confederation and the Expansion of the Office of the Federal Attorney in 1935. This criminalized the disclosure of information obtained in the the court of a professional relationship”.15 The cumulative effect of these laws is where the implicit duty on bankers not to disclose account information is derived.

Overall, each historical milestone played a significant role in developing Switzerland’s banking laws. By acting as sort of a quasi-shelter throughout various times in history, Switzerland has managed to align itself as a major competitive force in foreign capital, now one of the world’s leading financial centers.16

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III. How Switzerland Enforces Bank Secrecy A. What Bank Secrecy Covers Though Switzerland has various laws clearly enforcing bank secrecy, no where is the doctrine specifically defined. Most Swiss court cite the the authority for bank secrecy to be the general concept of die Gehimsph@re. Die Gehimsph@re is a doctrine concerning a “sphere” of personal privacy rights heavily protected in Switzerland. These rights include privacy in one’s intellectual existence, health, family life, financial affairs and financial information.17 Moreover, die Gehimsph@ re protects not only individual autonomy, but that of businesses as well.

It is in the concept of die Gehimsph@ re that individual and banking relationships derive their protection. By protecting an individuals/entites banking autonomy, it is the, “ . . . banker’s obligation to keep in strictest confidence, all business and affairs related to the financial and personal circumstances of clients and some third parties to the extent that knowledge of such matters is acquired in the course of business.”18 In other words, Swiss authorities interpret the scope of secrecy so broadly, that generally any facet of economic life is protected.19 Therefore, any facts an individual, or entity, attempts to hide from the public, as pertains to its economic relationships, is automatically granted the protection of secrecy. 20 Any relationship with a bank, the nature of that relationship, any financial information given to that bank premised on that relationship, and relationships with other banks is all protected.21 Interestingly, not only will the disclosure of facts related to those relationships subject one to civil and criminal liability, but, the attempt to discover confidential information,

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regardless of whether actual disclosure is made, is punishable as well.22 The protection of these economic facts, and applicability of the laws, has no time limitation.23

B. The Domestic Enforcement of Bank Secrecy Switzerland consists of twenty-six loosely organized cantons; each canton having its own set of laws. The management of matters such as foreign affairs, control of arms, alcohol, regulation of currency, etc. is left to the central government. Cantonal laws control everything else. Therefore, Swiss banks, whether private financial institutions or employees, and all laws pertaining to bank secrecy were originally created subject to each individual canton.24 Secrecy laws were later codified, and are now enforced, pursuant to the Federal Banking Law of 1934,25 general statutory laws, contract and tort law as well.26 Adherence to bank secrecy laws is ensured by making transgressions subject to criminal and civil sanctions. Laws dealing specifically with the enforcement of these sanctions can be found in Articles 159, 162, 273, & 321 of the Swiss Penal Code, Swiss Civil law, and the Federal Banking Law of 1934.27 Sanctions may also be enforced under Article 398 of the Code of Obligations, where a banker has to obligation to maintain the confidentiality of all the information he learns about his client under an implied condition of the deposit contract between a bank and its customers.28 Should a bank or individual fail to maintain this confidentiality, assuming there is no acceptable exception, then an injured party by bring suit under both the Civil Code and Code of Obligations.

Moreover, Section XIV of the Federal Banking Law, Article 47 states that whoever divulges a secret entrusted to him by virtue of his professional banking capacity, and whoever

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tries to induce others to violate professional secrecy, shall be punished by imprisonment or fine.29 Violating parties, and banks, may be punished in lieu of employee’s termination.

C. The Enforcement of Swiss Bank Secrecy in Foreign Investigations Generally, Switzerland’s bank secrecy laws prohibit banks from disclosing the identity or business record’s of a customer’s account.30 However, there are instances in which foreign countries want to obtain the account information of its citizen for investigatory purposes.

Opinions often differ between Switzerland and the international community as to how this situation should be handled. Swiss authorities argue that every country operates under a certain degree of sovereignty and discretion. Particularly, with sensitive issue such as information exchange, evidenced by the absence of international mandates obligating countries to cooperate in the investigations of foreign jurisdictions. However, this hardline approach has not necessarily been the best position to take. Not only have countries began to perceive Switzerland as an impediment to their own governance, but countries have also began to characterize Switzerland as a harbor for criminals.

Realizing this, the Swiss government has slowly began to take a more conciliatory approach to information requests from foreign jurisdictions. For example, in the 1992 Convention Swiss authorities made a giant departure from its original position by mandating that banks verify identification in the various phases of opening and maintaining Swiss accounts.31 Therefore, contrary to popular belief, anonymous accounts may not be opened in Switzerland.

The identity of account holders must verified, and that information is then given to a limited number of senior bank personnel.32

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Switzerland has also allowed countries to retrieve the names of account holders by invoking various treaties and tax agreements. For example, a common means of exchanging information internationally is through the negotiation of bilateral treaties. In fact, most countries prefer bilateral treaties because the logistics may be worked out ahead of time, transaction costs are lower, the exchange of information is expedited, and litigation may be avoided. There are treaties, other than bilateral treaties, that countries may also be used to request account information; such as the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters. This Convention allows for a party to get evidence by using: letters of request, diplomatic officials, consular agents and the use of commissioners.33 There may also be instances in which countries want to retrieve account information for the purposes of a judgement rather than an investigation. Often a court will issue a judgment against an individual and require that all assets be seized. There is large a difference between the application of a foreign law and the recognition of a foreign judgment. 34 Originally, Swiss courts held that foreign judgments, particularly those dealing with foreign tax laws, could not enforced in Switzerland. Slowly over time, and under building international pressure, courts have begun to ease up and allow the exchange of more information, pursuant to certain exceptions . 35 However, because there are no international laws dealing the with enforcement of foreign judgements, Swiss courts have made very clear that disclosure is pursuant to the discretion of Swiss authorities and there is no obligation to do so.36 There is a law, The Federal Statute on Private International Law (the “PIL Statue�), governing the enforcement of foreign judgments.

Enacted by the Swiss government in January of 1989, the PIL statute does allow for the

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recognition and enforcement of foreign judgments under a few, and fairly rare, circumstances.37 38

To preserve the integrity of Swiss secrecy laws, there are limitations as to when countries must receive account information, and how much information must be disclosed. For example, there is a public policy exception that allows Swiss authorities to refuse to recognize or enforce judgments that violate public policy. The public policy exception comes into play when the application of a foreign law would lead to what the Swiss believe is an unacceptable result, or one that is violative of its fundamental beliefs. The judgment must be in clear contravention of what is considered fair, not merely a disagreeable result.39 Moreover, the PIL Statute requires that international treaties take precedence. 40 Consequently, prior to the enactment of PIL the law relating to the release of account information was more restrictive.41 However, with the recent proliferation in information and tax treaties, the instances in which information must be released have significantly increased.

In the end, though there has been an increasingly progressive trend in the creation and enforcement of treaties, most are still relatively ineffective in compelling the exchange information in foreign tax investigations. Moreover, as far as tax judgments are concerned, Swiss courts will not directly or indirectly enforce foreign tax judgments.42 This is primarily because Switzerland does not regulate the tax arena as heavily as its American counterpart. 43 Nevertheless, each has been extremely helpful in streamlining the investigations by foreign agencies and allowing the enforcement of foreign judgments overall.

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III. Limitations to Bank Secrecy Though broad, the laws of bank secrecy are not limitless. Exceptions to the general rule of non-disclosure can be found in various bodies of law, including; administrative law, bankruptcy law, civil procedure, inheritance law, tax law and international treaties.44 Pursuant to a 1997 bi-lateral agreement, with countries including the United States, Swiss courts began compelling Swiss authorities to assist foreign jurisdictions in obtaining account information for the investigation of offenses committed within the requesting country’s jurisdiction.45 To comply with bank secrecy laws, the requesting organization must make a formal written request to Swiss authorities for all information covered by Swiss secrecy law.46 Swiss authorities then look to Swiss law and determine whether compulsory assistance required, and if so, to what extent. 47 Authorities determine compulsion by deciding whether the offense falls under a recognized category in the treaty. If so, then authorities must decide what information is directly related to the investigation, and of that, how much must be disclosed. If the request does not fall under an offense listed in the schedule of the treaty, or is not considered an offense under both American and Swiss law, then there is no justification for an exception to general secrecy law and the Swiss authorities may use discretion as to disclosure.

Note, the importance of this later dual criminality requirement, i.e. that an offense be a punishable crime both in Switzerland and the foreign jurisdiction, is that many of the banking and security offenses considered criminal in America do not translate to being an offense in Switzerland. For example, tax evasion, i.e. the failure to report income or assets, is not considered a crime in Switzerland. Conversely, in the United States, both tax fraud and tax

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evasion are criminal offenses.48 More often than, American authorities request account information from foreign jurisdictions as a result of tax issues. Consequently, both countries contravening laws pose a problem, as they significantly limit the amount of information that may be received as a foreign government may not request information on a bank account citing tax evasion as a reason.49 Exceptions may be made, where taxes are involved, if the tax offense is fraud, i.e. purposefully falsifying documents and records apart from the tax return itself. 50 However, these exceptions rare and usually have very high burdens on the investigating unit.51 On the domestic front, there are certain obligations, such as the obligation to testify and or provide information in investigations, that the Swiss government may use to pierce the veil of bank secrecy and subject individuals to criminal penalties for not disclosing information. 52 Ultimately, though the notion of consumer privacy is deeply embedded in the Swiss legal system, the Swiss have made a point not to protect such privacy to the extent of shielding criminals.53 Consequently, activities such as money laundering, fraud, and terrorist activities, or other crimes will warrant less protection, and likely result in disclosure.

VI. Past Agreements Between the United States and Switzerland on Information Exchange Over the years, continuing pressure from major economic powerhouses, such as the United States, has resulted in Switzerland slowly easing its reins on secrecy regulation. To this day, the United States continues to influence the exchange of information inside and outside the borders of Switzerland; creating a strange dynamic between its legislative and executive bodies.

This push-pull dynamic between both bodies has resulted in a simultaneous trend of progression

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and regression within Switzerland’s bank secrecy laws. On the one hand, there are more areas in the financial sector being regulated, such as insider trading, money laundering, and general taxation, that previously were left unregulated.54 There has also been a proliferation in the number of tax treaties being made between Switzerland and various countries each year. On the other hand, there has also been a regressive trend in the protective effect of secrecy laws, with the number of laws being passed declining and more exceptions being made to those laws still existing.

Typically, agreements between the United States and Switzerland dealing with information exchange have tax implications or the result of tax treaties. This is because American authorities request account information, more often than not, as a result of an investigation or finding of tax transgressions. Generally, tax treaties serve two purposes; to avoid double taxation and prevent offenses such as tax evasion.55 Though American treaties with Switzerland have varied over the years, those purposes, have generally remain the same.56 As an example, below is a brief survey of a few agreements that have been made between the United States and Switzerland concerning information exchange.

A. 1996 Tax Information Exchange Agreement After 16 years of negotiating, this agreement was signed on October 2, 1996 and superseded the original tax treaty of 1951.57 Though there were previous agreements, both formal and informal, containing information sharing provisions, they were, for the most part, ineffective. Primarily because terms were left undefined and various aspects of the agreements

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were extremely vague. Consequently, what is known as todays formal procedures of obtaining and sharing account information originates from Article 26 of the 1996 agreement.

The primary goal of this agreement was to catch tax evasion by strengthening the methods by which information could be shared between the two countries. 58 There was a provision checking disclosure called the Benefits Clause. The Benefits Clause gave individuals and entities a means of evading the disclosure of account information. By providing seven categories of eligible persons, the use of the Benefits Clause was extremely limited.59 Individuals were only allowed to utilize the provision if specifically described in any one of the seven safe harbors named in the agreement.60

B. The 2003 Tax Information Exchange Act Upon discovering how limited the applicability of the 1996 agreement was, and how little information exchange it allowed for, the United States worked with Switzerland to revise it in 2003.61 The new agreement served as a means of clarifying Article 26 (the article dealing with information sharing) of the Convention by narrowing broad points and a providing a definition of tax fraud.62 The 2003 agreement also increased the number of instances in which information could be shared. Information could be exchanged in order to, “properly implement the provisions of the convention or to prevent tax fraud or the like in relation to the taxes that are the subject of the convention.�63 The allowance for greater information exchange also allowed for greater surveillance of accounts held in Switzerland.

The new agreement was not only a means of clarifying the previous agreement, but also a strategic maneuver by Switzerland to reconcile its relationship with the United States.

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Switzerland had begun to recognize that many of its protective mechanisms had, “become somewhat of an embarrassment . . . by assisting in earning the Swiss a reputation of being a haven for tax fraud, money laundering, and organized crime.�64 A particular example of such embarrassment came after the events of September 11, 2001. There was various testimony presented to the American Congress indicating that terrorist cells were using Switzerland as a means of hiding money.65 In fact, a flyer was presented, during testimony to a Congressional Commission, about an Islamic fund for Palestine advertising itself as a non-profit working to collect donations and contributions for Palestinians effected by the war.66 Ultimately, the primary intention of the 2003 agreement was to broaden the amount of cooperation and information exchanged between both countries by creating an implied contractual duty under Swiss contract and agency law.67 Moreover, it is interesting to note that the 2003 agreement is where tax fraud became an offense warranting compulsory disclosure.

However, no where in the 2003 agreement does it specifically state what constitutes tax fraud. 68 In order to interpret whether tax fraud is at issue, one must refer to the protocol of the 1996 agreement. 69

C. Other Notable Agreements 70 Below are a few agreements that do not deal specifically with information exchange, but have been cited or used by regulatory agencies in order to obtain some form of account information.

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i. Law on International Mutual Assistance in Criminal Matters (IMAC)71 Enacted in 1981, it entitled any country to compel Switzerland provide bank records.

However, the crime the individual, or entity, is accused of must be a punishable offense in both the requesting country and Switzerland. ii. American-Swiss Treaty on Mutual Legal Assistance in Criminal Matters When requested to release information, this treaty allows the requested country the ability to cite important national interests (whether they be security reasons or those relating to a country’s autonomy) that warrant a country’s non-cooperation.72 Information must be requested by and forwarded to the central authorities of each country and any information provided must only be used for the purposes of the investigation/proceedings. 73 iii. U.S. Model Double Tax Treaty (MDTT) Under Article 26 of the MDTT American authorities may exchange tax information with foreign jurisdictions in conjunction with the Convention on Mutual Administrative Assistance in Tax Matters .74

VII. The U.S.-Swiss Protocol of 2009 A. The Environment There have been several instances in the past where international pressure caused changes to Swiss bank secrecy law. For example, the Swiss government was recently persuaded into publishing the names and account numbers of Jewish account holders that were Nazi victims during the World War.75 Not to long before that, the funds of the Filipino President, Ferdinand

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Marcos, were released and transferred back to the Philippines when he was convicted of various transgressions in his country’s courts.

The most recent instance occurred in early 2009, when the Justice Department indicted a former UBS banker, Bradley Birkenfeld, for conspiring to defraud the IRS by assisting clients in avoiding American reporting requirements on Swiss accounts.76 Based on testimony he gave, the U.S. brought civil suit against Switzerland alleging the “systematic and deliberate” violation of American laws by promoting offshore accounts to American citizens. In an attempt to settle the case outside of court, the U.S. Attorney General asked that UBS turn over the information for 52,000 account holders. For an idea as to the scale of this investigation, at one point these accounts under investigation were said to total $18 billion dollars.77 Originally denying the request, asserting that the disclosure would be in contravention with its bank secrecy laws,78 Switzerland later gave UBS permission to turn over the account details of 4,450 American account.79 This ordeal is what caused the recent agreement to be created. The first of its kind, the agreement has been heralded as a “major step forward with the IRS’s efforts to pierce the veil of bank secrecy and combat offshore tax evasion.” Terms held to be vague in the 2003 agreement were further refined and the protocol details an efficient process streamlining information exchange in the future.

The agreement has two parts, the first requiring the disclosure of account detail for varying accounts under investigation by the tax authorities.80 By conceding to the disclosure, the Swiss government estops U.S. taxing authorities from being able to enforce a John Doe Summons.81 Upon disclosure the U.S. government files a “stipulation of dismissal” as to the

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John Doe Summons, premising dismissal upon the verified release of the account information.

Civil action may be reinstated if the account information is not received.82 To initiate the process of information exchange, the agreement requires that the IRS submit a treaty request to the Swiss government, describing the account for which it is requesting information.83 The Swiss government must then submit the request to the bank, directing that the information be turned over directly to the IRS. 84 In UBS ordeal, this caused over 500 account holders receive letters from UBS, notifying them that their information would be provided to the IRS.85 Account holders were then given until September 23, 2009 to make voluntary disclosures, and exploit protection provided by IRS’s voluntary disclosure program for offshore assets. For those who disclosed information voluntarily, the program offered the opportunity to avoid criminal prosecution.86 For those who did not, notices were sent out notifying them of their opportunity to make appeals to the Federal Administrative Court in Bern. 87 In the end, over 14,700 Americans took advantage of the amnesty program and voluntary submitted account information to the IRS. The second part of the agreement creates a new mechanism, with the binding authority of a treaty, between the United States and Switzerland facilitating the release of information in the future.88 The protocol modifies the existing income tax treaty to permit tax information to be exchanged to the full extent allowable under the Organization for Economic Cooperation and Development’s Model Tax Convention. 89

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B. The Effect the New Agreement Will Have on Future Information Exchange For one, the recent agreement shows that American regulatory agencies are beginning to aggressively combat the issue of offshore tax evasion. The ability of governmental authorities to negotiate deferred prosecution serves as a signal to international banks that the American government will seek to penalize them for aiding persons who commit tax crimes.90 Secondly, the agreement has immense and lasting ramifications on offshore banking.

Many, if not most, of those holding accounts offshore do so under the assurance that those accounts fall under the highest standard of confidentiality.91 The recent agreement makes very clear that the protection of account privacy is not iron clad, and information may be readily provided in many instances.92 In addition to its many insights, the recent agreement also poses many questions. For example, with the new quasi-oversight that Swiss Banks are being asked to engage in will they now have a duty to report tax evasion? 93 If so, will the Swiss government go so far as to amend its criminal laws regarding tax evasion, allowing it to become a prosecutable offense? If not, then how much oversight must Swiss banks engage in? What measures must it take so that they may not be regarded as encouraging offshore criminal behavior?

VIII. The Debate The premise of bank secrecy is not novel to the international community. Aside from Switzerland, there are at least 19 other countries that offer varying forms of bank secrecy protection. For those seeking to enforce domestic tax policies, combating secrecy concerns is a paramount fight. Consequently, there are many countries seeking the creation and enforcement

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of international economic standards specifically with regard to tax enforcement and information exchange. Conversely, there are several parties that argue foreign tax laws should not be enforced internationally, the biggest opponent being Switzerland itself.

For the most part, those opposed to international enforcement cite the principle of territorial sovereignty. The Swiss courts have articulated the principle to essentially mean that, “one state may not exercise its power, in any form, within the territory of another state.�94 95 Therefore, when there is no treaty or agreement, there is no no obligation to enforce foreign tax judgments and/or penalties. For example, in Switzerland in particular courts usually require treaties or conventions before compelling the enforcement of a judgment. 96 Those countries who are for the enforcement of internationally recognized guidelines often cite the need for uniformity, and the ability to enforce domestic regulations without having to deal with being under-minded or capitalized on. Ultimately, many scholars agree that how information is exchanged, and specifically information exchanges as pertains to tax law, is a domestic issue.

Consequently, Switzerland’s sovereignty ought to be respected.

Most of the tension between the countries wanting more global economic transparency, such as the United States, and countries wanting more economic autonomy, such as Switzerland, lies in their vastly differing treatment of banks and bank secrecy. Ranging from professional exceptions, societal perceptions and the degrees of regulation, both sides often have a vastly different approach. Nevertheless, there will need to be a balancing act between cooperating with the requests of investigatory agencies and teetering the line so that there is no violation of their strict secrecy laws. 97 98

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XI. What Lies Ahead While strides have been made to combat tax offenses on a global front, there still is no international body governing tax offenses. Consequently, international regulation is sparse, inconsistent, and generally ineffective. The various agreements I have discussed above have mad a slight difference, but only apply to those country’s that are signatories; there is no binding effect on those who are not. The European Union. has made suggestions, such as levying tax penalties against the Swiss government if serious changes to its banking laws are not made soon.

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Japan has made similar threats. As of right now, an international watch-dog group, the OECD,

has developed a program that works as a global tax cooperative. With absolutely no binding authority, the premise of the program is to crack down on countries with harmful tax practices by promoting healthy information exchange and publishing an annual list of non-cooperative tax havens.100 Significant strides to tax evasion cannot be made until there is a global governing body, with globally binding guidelines to supervise financial activity and discipline tax havens accordingly.

In the United States, American authorities have recently suggested proposing a law in which the very act of trading securities in the United States would waive the applicability of foreign secrecy laws (i.e. waiver by conduct).101 Under the proposal, the law would be implemented by pure statute or included in customer agreements provided by the broker .102 If an individual, or entity, purchases or sales securities in the American market, that would trigger an irrevocable disclosure of any information requested by American investigatory authorities or proceedings. The waiver would apply solely to information involved with the purchase or sale in question.

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In the meantime, to further its movement on combating tax evasion, the United States must extend the agreement reached with UBS to the 300 remaining private banks in Switzerland; including Credit Suisse. The United States should also provide the same opportunities to Hong Kong, Liechtenstein, Luxemborg, Panama, and any other countries perceived as tax havens with stringent bank secrecy laws.103 On the domestic front, there is already legislation before Congress, The Stop Tax Haven Abuse Act (S. 506) which would allow the United States to prohibit American financial institutions from doing business with foreign banks that impede U.S. tax enforcement.104 Moreover, the IRS has will need to expand its recently created “wealth unit” in order to better combat the rapidly rising problem of international tax evasion. 105 The unit is comprised of “hundreds” of individuals that will focus on trusts, real estate investments, privately held companies and other business entities.106

V. Conclusion In the future, it will be interesting to see what steps the United States will next take in its campaign on information exchange and tax evasion. However, what will be of even more interest is how the Swiss government plans to nullify the negative reactions it has been receiving from its own citizens in response to the recent changes. As of recently, the government has been coming under fire for what has been perceived as its catering to American concerns at the expense of Swiss rights. Though the government publicly denies the adoption of an “automatic exchange” regime, the recent changes beg the question as to when there will be “too much” cross-border cooperation.107 Will it be when the Swiss government begins to act more in keeping with the American perception of banking? Or once account holders begin flocking to other countries with

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secrecy laws still largely intact? At what point with the Swiss government begin to feel uncomfortable and start pushing back?

There is plenty of evidence that United States is serious about the new push for tax enforcement. Legislation is being introduced, and complete departments are being created to combat the problem. In fact, the civil case filed against Switzerland came on the heels of a criminal case filed earlier in 2009 against UBS to which the troubled bank admitted to tax fraud.108 However, there are signs that Swiss citizens are not likely to back down quietly. In a recent survey 1,170 individuals in German speaking Switzerland were asked if they felt that bank secrecy was worth . 109 Over 72 percent were in favor of preserving bank secrecy, with 65 percent saying they would vote to keep bank secrecy for both foreign and domestic clients if the issue came to vote.110 Note that half the respondents in that same survey stated being for the preservation of bank secrecy but against facilitating tax evasion. In order for America to achieve what it wants, leaving the Swiss people freely create their own regulations would be the best option. 111

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1

Ari Goldman, Swiss Face Pressure from Europe to Loosen Bank Secrecy Laws, N.Y. TIMES, Sept. 7, 2002, at C3.

Greg Brabec, The Fight for Transparency: International Pressure to Make Swiss Banking Procedures Less Restrictive, 21 Temp. Int’l & Comp. L.J. 231 232-33 (2007); see also Bruno Gurtner, Tax evasion: hidden billions for development, http://unpan1.un.org/intradoc/groups/public/documents/APCITY/UNPAN018181.pdf (last visited Feb. 5, 2010) 2

3

Id.

Greg Brabec, The Fight for Transparency: International Pressure to Make Swiss Banking Procedures Less Restrictive, 21 Temp. Int’l & Comp. L.J. 231, 231(2007).

4

5

Id.

6

Id. at 245.

7

Michael A. Fitts, U.S.-Swiss Tax Treaty Provides for Data Exchange, U.S.L.W. Sept.29 , 2009, at A1.

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Werner de Capitani, Bank Secrecy Today, 10 U. Pa. J. Int'l Bus. L. 57, 58 (1988); see also, Jörg P. Müller, Banking and Economic Confidentiality under Swiss Law, The Swiss Bank Account, Practising Law Institute 9, 11-13 (1970).

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See Michele Moser, Switzerland: New Exceptions to Bank Secrecy Law Aimed at Money Laundering and Organized Crime, 27 Case W. Res. J. Int'l L. 321, 321 (Spring/Summer 1995) (discussing the Swiss's continued resistance at easing the restrictions of their bank secrecy laws).

Fedders, Wade, Mann & Beizer, Waiver by Conduct-A Possible Response to the Internationalization of the Securities Markets, 6 J. Comp. Bus. & Cap. Mkt. L. 1, 3-4 (1984).

10

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Jennifer A. Mencken, Supervising Secrecy: Preventing Abuses Within Bank Secrecy and Financial Privacy Systems, 21 B.C. Int'l & Comp. L. Rev. 461, 468 (1998).

12

Id.

13

Id.

14

C. Todd Jones, Compulsion Over Comity: The United States' Assault on Foreign Bank Secrecy, 12 Nw. J. Int'l L. & Bus. 454, 462 (1992).

15

See Urs Martin Lauchli, Swiss Bank Secrecy with Comparative Aspects to the American Approach, 42 St. Louis U. L.J. 865, 865 (1998).

Fedders, Wade, Mann & Beizer, Waiver by Conduct-A Possible Response to the Internationalization of the Securities Markets, 6 J. Comp. Bus. & Cap. Mkt. L. 1, 31 (1984).

16

17

August Egger, Kommentar zum Schweizerischen Zivilgesetzbuch [Constitution] art. 26 (Switz.).

Beckett Cantley, The New Tax Information Exchange Agreement: A Potent Weapon Against U.S. Tax Fraud?, 4 Hous. Bus. & Tax L.J. 231, 235 (2004).

18

19

Jörg P. Müller, Banking and Economic Confidentiality under Swiss Law, The Swiss Bank Account, Practising Law Institute 9, 12 (1970).

24

20

Jörg P. Müller, Banking and Economic Confidentiality under Swiss Law, The Swiss Bank Account, Practising Law Institute 9, 11-13 (1970).

21

Maurice Aubert, et. al., Le Secret bancaire suisse [Swiss Bank Secrecy] 80 (1982).

22

Jörg P. Müller, Banking and Economic Confidentiality under Swiss Law, The Swiss Bank Account, Practising Law Institute 9, 11-13 (1970).

Greg Brabec, The Fight for Transparency: International Pressure to Make Swiss Banking Procedures Less Restrictive, 21 Temp. Int’l & Comp. L.J. 231, 240 (2007).

23

24

Swiss-bank-accounts.com, http://swiss-bank-accounts.com/e/banking/secrecy/definition.html (last visited Feb. 4, 2010).

25

Id.

Fedders, Wade, Mann & Beizer, Waiver by Conduct-A Possible Response to the Internationalization of the Securities Markets, 6 J. Comp. Bus. & Cap. Mkt. L. 1, 32 (1984).; see also Letter from James E. Buck, Secretary, New York Stock Exchange 4 (April 29, 1977).

26

Article 159 of the Swiss Penal Code subjects the banker to criminal liability for revealing customer information and the bank to liability for unfaithful management if disclosure harms the client’s assets. Article 162 deals with the non-bank sector of the Swiss financial market and financiers and bans the disclosure of manufacturing or business secrets, Article 273 deals with providing information to foreign officials or organizations. Article 321 states that bank secrecy provisions that deal with violations of professional secrecy be left to the Bankruptcy Code. Article 47 of the Swiss Federal Banking Law of 1934 provides: (1) Every person working at a bank has a duty to keep secrets; (2) Third parties who lead others to infringe the secrecy duty are also to be punished, even if the offense never takes place; (3) Infringement due to pure negligence, as well as intentional infringement, is to be punished; (4) The infringement of bank secrecy may be prosecuted by the court on its own initiative; (5) The penalties are a prison term not to exceed six months or a fine not to exceed Sfr. 50,000; either penalty may be cumulated; (6) Breach of professional secrecy remains punishable even after termination of a public or private employment relationship or the practice of a profession; and (7) Bank secrecy is not absolute; in specific legal circumstance. As far as civil charges, the right to privacy is recognized as a fundamental right. see Federal Banking Law, art. 47; see also Michele Moser, Comment, Switzerland: New Exceptions to Bank Secrecy Laws Aimed at Money Laundering and Organized Crime, 27 Case W. Res. J. Int'l l. 321, 323 (1995).

27

28

Hermine Herta Meyer, The Banking Secret and Economic Espionage in Switzerland, 23 Geo. Wash. L. Rev. 284, 288 (1955).

29

Bankengesetz, art. 47 states as follows: (1) Persons who disclose confidential information entrusted to them or which has come to their knowledge in their capacity as official, employee, mandatory, liquidator or commissioner of a bank, or as observer of the Banking Commission, or as official or employee of an authorized audit firm, and persons who attempt to induce others to such violations of professional secrecy, shall be penalized by imprisonment not to exceed six months or a fine not to exceed Sfr. 50,000.

(2) Offenses committed negligently shall be penalized by a fine not to exceed Sfr. 30,000.

(3) Violation of professional secrecy is subject to prosecution even after the culpable person has resigned from office or terminated the employment relationship or the professional activity.

(4) Federal and cantonal regulations regarding the obligation to testify and to furnish information to government authorities shall also apply.

25

30

Foreign Bank Secrecy and the Evasion of United States Securities Laws, 9 N.Y.U. J. INT'L L. & POL. 417 (1977). Other Switzerland and Liechtenstein's bank secrecy statutes provide for a prison term, fine or both if violation of the statute is willful while violations deemed to be negligent are punished by the levy of a fine. For other examples, see Fedders, Wade, Mann & Beizer, Waiver by Conduct-A Possible Response to the Internationalization of the Securities Markets, 6 J. Comp. Bus. & Cap. Mkt. L. 1, 33 (1984).

31

Identification of account holders must be verified when: opening accounts, opening a security account, entering a fiduciary transaction, renting safe-deposit boxes, and cash transactions exceeding 25,000 Swiss Francs. Agreement on the Swiss banks' code of conduct with regard to the exercise of due diligence, art. 2, 1992 (Union Bank of Switzerland).

32

Michael Arthur Jones, Swiss Back Accounts: A Personal Guide to Ownership, Benefits and Use 39 (1990) U.S.L.W. at 36.

33

Id.

34

Id. at 37.

Felix D.Strebel, The Enforcement of Foreign Judgments and Foreign Public Law, 21 Loy. L.A. Int’l & Comp. L.J. 55, 88-90 (March 1999).

35

36

Felix D.Strebel, The Enforcement of Foreign Judgments and Foreign Public Law, 21 Loy. L.A. Int’l & Comp. L.J. 55, 88 (March 1999).

37

Schweizerisches Strafgestzbuch [Swiss Penal Code], SR 291 [Swiss Regulations]; Codice penale svizzero [Cp], RS 291, art 26(a).

38

See PIL Statute §1 (Switz.).

39

National Surety Co. v. Larsen [1929] D.L.R. 918, 920.

40

See PIL Statute §1(Switz.).

41

Id.

42

Felix D.Strebel, The Enforcement of Foreign Judgments and Foreign Public Law, 21 Loy. L.A. Int’l & Comp. L.J. 55, 79 (March 1999).

43 Rochelle

Kauffman, Secrecy and Blocking Laws: A Growing Problem as the Internationalization of Securities Markets Continues, 18 Vand. J. of Transnat’l L. 809, 834 (1985) (discussing the different procedures by which countries create and enforce securities laws).

44

Maurice Aubert, Swiss Bank Secrecy: General Extent and Recent Developments 3 (1995).

45

Id.

46

Treaty for Mutual Assistance in Criminal Matters, May 25, 1973, United States-Switzerland, 27 U.S.T. 2019, T.I.A.S. No. 8302. [hereinafter cited as Treaty].

47

Schedule: Offenses for Which Compulsory Measures are Available (appended to treaty), 27 U.S.T. 2064, 2066.

26

48

26 U.S.C. §§ 7201, 7206 (2006). Unlike Swiss tax law, Section 7206 makes failure to make declarations, perjured declarations, fraudulent documentation, withholding, falsifying and destroying records are all felonies, and carry a punishment of up to three year in a prison and a fine of up to $100,000. Under 7201 tax evasion is a felony punishable by up to five years in a prison, and a fine of up to $100,00.

49

Swiss-bank-accounts.com, supra note 24.

50

Id.

51

Note, Exceptions only apply to acts that are criminal under Swiss law. Swiss-bank-accounts.com, supra note 24.

Urs Martin Lauchli, Swiss Bank Secrecy With Comparative Aspects to the American Approach, 42 St. Louis U. L. J. 865, 868 (Summer 1998).

52

53

See also Schweizerisches Strafgestzbuch [Swiss Penal Code], SR 311.0.

In 1988, Article 161 was created which made the use of confidential information for insider trading an offense.

Two provisions (Article 305) were added in 1990 dealing with money laundering and imposing liability on those who obstruct the recovery of money, fail to identify the owners of the money, or thwart the identification of the source of the money.

54

55

Robert Thornton Smith, Tax Treaty Interpretation by the Judiciary, 49 Tax. Law. 845, 845 ( Summer 1996).

56

Id at 846.

57

W. Warren Crowdus, U.S., Switzerland Sign Income Tax Treaty, 13 Tax Notes Int'l 1983, 1985-87 (Dec. 16, 1996) [hereinafter U.S., Switzerland Sign Income Tax Treaty]. U.S.-Switzerland Income Tax Convention and Protocol, Signed October 2, 1996, With a Related Memorandum of Understanding 96, Tax Notes Int'l 194-41 (Oct. 4, 1996) [hereinafter 1996 Treaty]. “The convention will enter into force upon exchange of ratification instruments and will supersede the U.S.-Switzerland income tax convention signed on May 24, 1951.” Id. Its provisions will apply with respect to taxes payable at the source from the first day of the second month following its entry into force, and with respect to other taxes from the first day of January following its entry into force. Id. Beckett G. Cantley, The New Tax Information Exchange Agreement: A Potent Weapon Against U.S. Tax Fraud?, 4 Hous. Bus. & Tax L. J. 231, 231 (2004).

58

The seven categories are: the first is individuals, the second is contracting country, third is one engaged in an active trade or business in one of the contracting countries, the fourth is a recognized headquarters the fifth is a company, the sixth is companies, trusts and estates, and the seventh is specific family foundation. U.S.-Switzerland Income Tax Convention and Protocol, Signed October 2, 1996, With a Related Memorandum of Understanding 96, Tax Notes Int'l 194-41 (Oct. 4, 1996) [hereinafter 1996 Treaty]. “The convention will enter into force upon exchange of ratification instruments and will supersede the U.S.-Switzerland income tax convention signed on May 24, 1951.” Id. Its provisions will apply with respect to taxes payable at the source from the first day of the second month following its entry into force, and with respect to other taxes from the first day of January following its entry into force. Id. 59

60

W. Warren Crowdus, U.S., Switzerland Sign Income Tax Treaty, 13 Tax Notes Int'l 1987, 1987 (Dec. 16, 1996) [hereinafter U.S., Switzerland Sign Income Tax Treaty].

61

Michele Moser, Switzerland: New Exceptions to Bank Secrecy Law Aimed at Money Laundering and Organized Crime, 27 Case W. Res. J. Int'l L. 231, 231 (Spring/Summer 1995) (discussing the Swiss's continued resistance at easing the restrictions of their bank secrecy laws).

27

62

Alison Bennett, U.S., Switzerland Reach Mutual Agreement On Civil, Criminal Tax Information Exchange, Daily Tax Report, Jan. 27, 2003, at GG-1 (stating: the agreement clarifies expected responses to state requests for tax information in the effort to prevent tax fraud. It also sets out a detailed description of conduct that would constitute tax fraud, as well as the factors on which a “reasonable suspicion” of fraud should be based.

In addition, the document sets out 14 hypothetical examples of conduct that would be considered tax fraud.)

63

Organization for Economic Co-operation & Development (“OECD”), Improving Access to Bank Information for Tax Purposes: The 2003 Progress Report 13 (2003), http://www.oecd.org/dataoecd/5/0/14943184.pdf [hereinafter OECD Report].

64

Michele Moser, Switzerland: New Exceptions to Bank Secrecy Law Aimed at Money Laundering and Organized Crime, 27 Case W. Res. J. Int'l L. 327-29 (Spring/Summer 1995) (discussing the Swiss's continued resistance at easing the restrictions of their bank secrecy laws).

65

Progress Since 9/11: The Effectiveness of U.S. Anti-Terrorist Financing Efforts, Hearing Before the Subcommittee on Oversight and Investigations of the Committee on Financial Services U.S. House of Representatives, 108th Cong. 78, 79 (2003) (testimony of Steven Emerson, Executive Director, The Investigative Project) (stating that the Islamic Fund for Palestine, a charitable, non- profit institution, with ties to Al-Qaeda, was established in the United States and used bank accounts in Switzerland to house donated funds).

66

Id.

Under Article 394 an agent undertakes to carry out the contractually agreed upon business transaction or services which he has been entrusted by the client.” Under 398 requires agents to exercise the same amount of care required by employees. Michele Moser, Comment, Switzerland: New Exceptions to Bank Secrecy Laws Aimed at Money Laundering and Organized Crime, 27 Case W. Res. J. Int’l L. 321, 326 (1995).

67

68

See also Martin Gelnar, Swiss Economics Minister Reconfirms Bank Secrecy's Future, 21 Tax Notes Int'l 2898 (Dec. 25, 2000) (noting that the “Swiss Economics Minister Pascal Couchepin reconfirmed recently that Switzerland would not give up its banking secrecy laws in upcoming negotiations with the European Union, according to the Swiss biweekly Finanz und Wirtschaft. His comments were similar to those made earlier by Finance Minister Kaspar Villiger.”)

69

See U.S.-Switzerland Income Tax Convention and Protocol, Signed October 2, 1996, With a Related Memorandum of Understanding 96, Tax Notes Int'l 194-41 (Oct. 4, 1996) [hereinafter 1996 Treaty] (stating that the general definition of tax fraud is fraudulent conduct that causes or is intended to cause an illegal and substantial reduction in the amount of tax paid to the contracting state).

As an aside both Germany and Norway have reached agreements with Switzerland that allow information exchange in investigation involving tax fraud as well.

70

71

See ABA, International Agreements and Understandings for the Production of Information and Other Mutual Assistance, 29 Int’l Law J., 780, 838 (1995).

72

See Treaty, supra note 54, at art. 3, para. 1(a).

73

The central authority for Americans is the attorney general, and on the Swiss side the FOP.

28

74

Michael I. Saltzman & Jean-Claude Wolff, The Growing Role of Information Exchange in U.S. Tax Treaties, 32 Tax Notes Int’l 943 (2003); Vito Tanzi & Howell H. Zee, Taxation in a Borderless World: The Role of Information Exchange, 28 Intertax 58 (2000); Gracía Prats & FranciscoAlfredo, Exchange of Information under Article 26 of the UN Model Tax Convention, 53 BIFD 541, 542 (1999).

75

See Danow, supra note 22; see also Rolf H. Weber, Holocaust-Related Claims and Liability of Swiss Banks-Political and Legal Implications, 36 Int'l Law. 1213 (2002).

76

John C. McDougal, IRS and Tax Treaty Partners Target Liechtenstein Accounts, ALI-ABA July 31-August 1, 2008, SP017 ALI-ABA 929.

Anonymous, Don’t Make Swiss Cheese of the Tax Law, U.S. News Week August 24, 2009 at A2. (Discussing Switzerland and its reputation with tax evasion. Also discusses the repercussions of the Swiss’ actions on the American tax system.

77

Martha Brannigan, U.S., Swiss reach tentative pact in UBS bank secrecy dispute, Jul. 31, 2009, www.miamiherald.com (last accessed Sep.31, 2009).

78

79

Don’t Make Swiss Cheese of the Tax Law, supra note 77.

80

Eventually, the United States determined that only accounts that contained 1 million or more Swiss francs at any time between 2001 and 2008, or accounts in which there was clear fraudulent action, i.e. fraudulent docs, and accounts that earn over 100,000 francs for at least three years. Martha Brannigan, U.S., Swiss reach tentative pact in UBS bank secrecy dispute. Martha Brannigan, U.S., Swiss reach tentative pact in UBS bank secrecy dispute, Jul. 31, 2009 www.miamiherald.com (last accessed Sep.31, 2009).

A John Doe summons is sent to demand customer names from a bank pursuant to evidence that these customers have likely broken federal tax laws. Id.; see also, U.S. Law Week, U.S., Swiss Governments Reach Agreement to Release Names of UBS Account Holders, 78 U.S.L.W. 2113, August 25, 2009. For an in depth discussion, authority for, and court documents pertaining to the John Doe Summons please see John C. McDougal, IRS and Tax Treaty Partners Target Liechtenstein Accounts, ALI-ABA July 31-August 1, 2008, SP017 ALI-ABA 929.

81

U.S. Law Week, U.S., Swiss Governments Reach Agreement to Release Names of UBS Account Holders, 78 U.S.L.W. 2113, August 25, 2009 at 2.

82

83 84

Id. Id.

85 Andrew

Ross Sorkin, Swiss Say First Appeals Filed in UBS Tax Case, December 16, 2009, www.miamiherald.com (last accessed Dec. 16, 2009). Note, though the agreement was reached in August, UBS did not start disclosing names until mid to late December. See also Andrew Ross Sorkin, Swiss officials hand UBS bank account data to U.S., December 28, 2009 www.miamiherald.com (last accessed Dec. 28, 2009).

86

Id.

87

Id.

U.S. Law Week, U.S., Swiss Governments Reach Agreement to Release Names of UBS Account Holders, 78 U.S.L.W. 2113, August 25, 2009 at 2.

88

89

U.S. Law Week. U.S.-Swiss Tax Treaty Provides for Data Exchange, 78 U.S.L.W. 2180, September 29, 2009 at 1.

Quoted from Bruce Zagaris, see U.S. Law Week, U.S., Swiss Governments Reach Agreement to Release Names of UBS Account Holders, 78 U.S.L.W. 2113, August 25, 2009 at 3.

90

91 Id.

29

92

Id.

U.S. Law Week, U.S., Swiss Governments Reach Agreement to Release Names of UBS Account Holders, 78 U.S.L.W. 2113, August 25, 2009 at 3.

93

94

Felix D.Strebel, The Enforcement of Foreign Judgments and Foreign Public Law, 21 Loy. L.A. Int’l & Comp.

L.J. 55, 80 (March 1999).

95 A “state”

has three elements: the exercise of undelegated governmental power, over a definite population, and in a defined territory. Id. Though, in the realm of tax laws, Switzerland has tax treaties with other countries to avoid double taxation there are none that deal with the enforcement of tax claims and tax judgments. J.M. Mössner, Taxation, INTERNATIONAL ENCYCLOPEDIA OF PUBLIC INTERNATIONAL LAW, Vol. 8 (Amsterdam: Elsevier 1985), at 502. For legislation on double taxation see Article 26 of the US Model Tax Treaty (MDT); see also James P. Springer, An Overview of International Evidence and Asset Gathering in Civil and Criminal Tax Cases, 22 Geo. Wash. J. Int’l L. & Econ. 277, 283-284 (1988).

96

Greg Brabec, The Fight for Transparency: International Pressure to Make Swiss Banking Procedures Less Restrictive, 21 Temp. Int’l & Comp. L.J. 231 1, 5 (2007); see also Organization for Economic Co-operation & Development (“OECD”), Improving Access to Bank Information for Tax Purposes: The 2003 Progress Report 13 (2003), http://www.oecd.org/dataoecd/5/0/14943184.pdf [hereinafter OECD Report].

97

98

Ellen R. Levin, Comment, The Conflict Between United States Securities Laws on Insider Trading and Swiss Bank Secrecy Laws, 7 NW. J. Int’l L. & BUS. 318, 323 (1985).

99

Suzanne Walsh, Taxation of Cross-Border Interest Flows: The Promises and Failures of the European Union Approach, 37 Geo. Wash. Int'l L. Rev. 251, 259-63 (2005).

100

Bruno Gurtner, Tax evasion: hidden billions for development, http://unpan1.un.org/intradoc/groups/public/ documents/APCITY/UNPAN018181.pdf (last visited Feb. 5, 2007).

Fedders, Policing Internationalized U.S. Capital Markets: Methods to Obtain Evidence Abroad, 18 Int’l Law, 89, 90 (1984).

101

Rochelle Kauffman, Secrecy and Blocking Laws: A Growing Problem as the Internationalization of Securities Markets Continues, 18 Vand. J. of Transnat’l L. 809, 826 (1985) (discussing the different procedures by which countries create and enforce securities laws).

102

Don’t Make Swiss Cheese of the Tax Law, U.S. Law Week August 24, 2009 (last visited December 18, 2009).

(Discussing Switzerland and its reputation pertaining to tax evasion).

103

U.S. Law Week, U.S., Swiss Governments Reach Agreement to Release Names of UBS Account Holders, 78 U.S.L.W. 2113, August 25, 2009 at 3.

104

105

Reuters, ‘Hundreds’ hired to hunt offshore tax evaders, Dec. 13 2009 http://www.msnbc.msn.com/id/34383346/ ns/business-us_business/print/1/displaymode/1098/ (last visited January 4, 2010).

106

Note, Germany, Japan and the UK are creating similar units. Id.

Statement by Hans-Rudolf Merz, the Swiss President. Andrew Ross Sorkin Swiss Say First Appeals Filed in UBS Tax Case, December 16, 2009.

107

30

Ultimately, UBS wound up identifying 300 US clients an paid 780 million dollars to settle the complaint. See AFP UBS set for “very small� disclosure in US tax case. http://www.google.com/hostednews/afp/article/ 108

ALeqM5gMwIaoRNYP2tR67D49rLoc_hvffQ 11.15.2009 109

Swissinfo.ch, pressure on banking secrecy galvanises support, Dec, 23 2009 ,http://www.swissinfo.ch/eng/ business/index/Pressure_on_banking_secrecy_galvanises_support.html?cid=7958708 (last accessed January 4, 2010).

110

Id.

111

Id.

31