Of Special Interest


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14th February 2012

Weglin & Co branded 'fugitive' by US prosecutors

The Swiss bank, Weglin & Co., was branded a fugitive by US prosecutors as a result of the US tax evasion prosecutions. Previously individuals from Swiss banks have been charged but not a bank, as an entity. This distinction is perhaps questionable in this instance as Weglin is a partnership and partnerships are generally not considered a separate entity legally (whilst limited companies are). Specifically Weglin & Co partners have unlimited liability. Weglin states that it has not been served with any criminal summons and hence was not required to appear.

The US authorities may have a more difficult time in this instance as they have drawn Judge Jed Rakoff to hear the case. The judge is known for careful analysis and questioning of decisions authorities expect to have rubber stamped by the court with minimum change. In response to being told the prosecution had no proposal as to how to get the bank into the court the judge responded, "Occasionally in these situations, progress is made through diplomatic channels. Unlike an individual, arresting a company is somewhat difficult, other than in science fiction."

Weglin continues to insist that it will assist the US authorities to the maximum allowed under Swiss banking privacy laws. The US authorities have been required to negotiate with the Swiss government in the past to have information released on individual customers. There is now a template solution allowing banks to release the names of customers when their accounts show suspicious behaviour. This is possible under Swiss law because tax evasion is a crime in Switzerland and if evidence of tax evasion can be provided, or the breaking of other law, customer information can be released. The privacy laws however forbid 'trawling', or the disclosure of information if there is no evidence of the customer having committed a criminal offence. The authorities appear to known of some of the US citizens who have evaded taxes but will seek to extract more names.

The US continues its campaign of prosecuting foreign banks whilst not taking criminal proceedings against its own citizens known to have evaded their taxes.