New prosecution fears for Swiss bank account holders

Last week it was reported that the Swiss private bank Julius Baer suffered a theft of personal data relating to clients who may have taken advantage of the country’s famous banking secrecy laws to evade tax. It is reported that the data was sold by a bank employee to German tax investigators who will now consider launching investigations into those concerned. It is not known if the data contains details of UK tax payers. If it did, those account holders will be left wondering how much protection is afforded by the UK Government’s declaration that it would not “actively seek to acquire customer data stolen from Swiss banks”.

This declaration falls short of agreeing not to use such data. As a matter of policy, HMRC is not afraid of using illicitly sourced information to launch investigations. In 2010, following a similar incident, HMRC acquired the details of hundreds of UK tax payers who held accounts with a Swiss division of HSBC. In this case the data was stolen by an IT contractor. The first prosecution relating to the material was disposed of in July this year: Michael Shanley was found to have evaded £430,000 in inheritance tax; he was ordered to pay a fine equating to almost 100% of the tax evaded plus costs.

The UK Swiss Confederation Tax Co-operation Agreement, anticipated to come into force in January 2013, will be the next development of interest for those with Swiss accounts. Under this deal, the Swiss authorities will raise a one off levy against bank accounts held by UK tax payers and transmit that money directly to the UK Treasury. They will also pass to the Treasury a percentage of any future income on the accounts. An important feature of this agreement is that the tax payer will remain anonymous, which leaves open the question as to whether or not the payment of tax in this way will protect those account holders from prosecution if their identity is discovered. A letter accompanying the agreement states that anyone who fully cooperates with the process is highly unlikely to face prosecution. However, limitations in the scheme, such as the fact that it only deals with accounts held as far back as 2002, means that any tax not accounted for prior to this date remains outstanding. Those with accounts which predate 2002 therefore remain at risk of detection and investigation.

In an age where huge quantities of data can be transferred at the press of a button, and where the political climate is turning against those who the Government perceives to be evading tax, those who appear clandestine with their finances are at increased risk of discovery.

Corker Binning is a law firm specialising in fraud, regulatory and criminal work of all types. For more information about our tax investigations practice and how we can help you, visit our website or call us on 0207 353 6000.