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Swiss Court Rules on Privacy Issues Related to Tax Evasion

Offshore Account Update

Posted on October 31, 2016 |

Boston international tax lawyers provide assistance to individuals who have undeclared offshore funds or who are concerned that U.S. taxing authorities are going to obtain information about their offshore investments.  If you want assistance with protecting your financial situation and avoiding or minimizing losses due to tax penalties, you should get legal advice as soon as possible.

The right to a lawyer is one of the most fundamental rights within the U.S. criminal justice system.  There are also many protections afforded by U.S. law to preserve the integrity of the attorney/client relationship. These protections must be in place so people can trust their lawyers, get appropriate advice in complex legal situations, and count on the ability to ask their attorneys questions about the law.

Unfortunately, not everyone respects the integrity of the attorney/client relationship.  Just recently, a Swiss Bank wanted to turn over private information about lawyers and law firms who the bank believes provided assistance to clients with tax evasion.  Fortunately, the Swiss Supreme Court ruled this was a violation of privacy. The fact that a Swiss bank even made this attempt shows how far banks are willing to go to protect themselves at the expense of both offshore account holders and other financial professionals.

Swiss Banks are Turning Over Private Information

Swiss banks had a long tradition of respecting privacy of account holders and of protecting the confidentiality of offshore accounts. This reputation was why so many people and companies opted to bank in Switzerland. This reputation exists no longer.

The U.S. government has created a program called the Swiss Bank Program, which allows banks to avoid being criminally prosecuted for the institution's role in facilitating tax evasion. The catch is that avoiding prosecution requires giving taxing authorities extensive details about account holders, including their transaction history and their private account details.

More than 80 banks have already participated in the Swiss Bank Program, willingly providing U.S. authorities with information that they need to go after U.S. citizens for tax evasion or even for simple failure to follow requirements related to reporting offshore accounts.  The penalties for a simple failure to file annual reports detailing offshore holdings are very substantial, so the decisions of the banks have dire financial consequences for the account holders who were counting on them to follow longstanding privacy rules.

One bank, the Lugano-based Corner Bank, planned to take things even further than just providing account holder info, as the bank intended to give details on lawyers and law firms who allegedly assisted with tax evasion. The U.S. has already indicted attorneys and gotten guilty pleas, so the bank's actions would likely have resulted in both legal trouble for the lawyers as well as in further problems for account holders.

The Swiss Supreme Court, however, ruled that the U.S. does not have adequate privacy laws to protect the lawyers and firms, and thus the bank could not turn over info because it would be a violation of privacy. While this is good news, it does not solve the problem of the eagerness the bank displayed to give up the info.

The fact that so many financial institutions in Switzerland are willingly cooperating with U.S. authorities should create serious concerns for everyone with funds offshore. If you find yourself in this situation, it is important to speak with attorney Kevin Thorn as soon as possible.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989

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