The prosecutions of other banks

Wegelin & Co.

When UBS withdrew from its cross-border business with American clients in 2008, thousands of account holders looked for another bank. Some found one. The American authorities spent the following years tracing the money that had left UBS, and the trail led to a number of Swiss institutions that had accepted it. The most prominent casualty was Wegelin & Co., a private bank founded in St. Gallen in 1741 and thus the oldest bank in Switzerland. The bank employed about 700 people in twelve Swiss branches and managed some CHF 24 billion. Its senior managing partner since 1989, Konrad Hummler, was one of the best-known voices of the Swiss banking community and a public defender of banking secrecy.¹

In January 2012 the American authorities charged three Wegelin employees with conspiring to conceal more than USD 1.2 billion of client assets from the Internal Revenue Service. On 27 January 2012 Wegelin announced that it would transfer the bulk of its business to a new bank, Notenstein Private Bank, which became a wholly owned subsidiary of the Raiffeisen group. Hummler attributed the step to the extraordinarily difficult situation and threat created by the legal dispute with the United States.² FINMA approved the transfer of the non-American business to Raiffeisen on the same day.³ What remained of Wegelin was essentially a legal shell holding the American exposure.

On 3 February 2012 the United States indicted Wegelin itself. It was the first time that a foreign bank had been indicted for enabling American tax evasion. Because Wegelin had no branches in the United States, the prosecutors relied on the fact that it had processed transactions for American clients through a correspondent account at the Stamford branch of UBS. They seized more than USD 16 million from that account.⁴ The use of the correspondent account as a jurisdictional link was a lesson that the whole Swiss industry absorbed. Any bank that cleared dollar payments through New York was within reach of an American prosecutor, whatever the location of its offices.

On 3 January 2013 Wegelin pleaded guilty in the federal court in Manhattan to conspiracy to evade taxes. Its managing partner Otto Bruderer admitted on behalf of the bank that, from about 2002 to 2011, Wegelin had agreed with American taxpayers to evade their tax obligations and had held undeclared accounts of more than USD 1.2 billion. After UBS had ceased to serve undeclared accounts in 2008, Wegelin had actively recruited departing clients, assuring them that their accounts would remain secret because the bank had no offices outside Switzerland. On 4 March 2013 Judge Jed S. Rakoff imposed the agreed sentence. Wegelin paid restitution of USD 20 million, a fine of USD 22.05 million and a civil forfeiture of USD 15.8 million, which together with the USD 16.2 million forfeited from the correspondent account brought the total to about USD 74 million.⁵ Wegelin announced that it would cease to operate as a bank once the case was concluded. The fate of a bank that had survived more than two and a half centuries of European history made a deep impression in Switzerland, perhaps more so than the far larger payments of UBS.

The failure of the “Lex USA” and the Swiss Bank Program

By 2012 the Department of Justice was investigating about a dozen Swiss banks, and the remaining institutions faced uncertainty about their own exposure. The Swiss and American governments therefore negotiated a global solution. Its Swiss component was a federal act, known as the “Lex USA”, which would have authorised banks for a limited period to cooperate directly with the American authorities without breaching Swiss law. The Council of States approved the bill. On 19 June 2013, however, the National Council rejected it definitively by 123 votes to 63. Opposition came from three directions at once: the Swiss People’s Party invoked national sovereignty, the Liberals argued that the banks should bear the consequences of their own conduct, while the Social Democrats criticised the complicity of the banks in tax evasion.⁶ Parliament thus refused to take legislative responsibility for a settlement whose terms it had not negotiated.

The Federal Council found another route. On 3 July 2013 it decided that banks could apply for individual authorisations under Article 271 of the Swiss Criminal Code, which penalises acts on behalf of a foreign state on Swiss territory without authorisation. Authorised banks could deliver information to the American authorities without committing an offence. The authorisations were subject to conditions. Banks had to inform their employees and protect them against discrimination, and they had to inform third parties such as external asset managers whose names were transmitted. Client data as such remained excluded. Only aggregated information on closed accounts and on transfers to other banks, the so-called leaver lists, could be delivered.⁷ Client names were to follow only through requests for administrative assistance.

On 29 August 2013 the Department of Justice and the Federal Department of Finance published a joint statement announcing the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks. Banks not yet under investigation could obtain a non-prosecution agreement by disclosing their cross-border activities in full, providing detailed information on accounts of American taxpayers, cooperating with treaty requests, identifying other banks involved in transfers, closing the accounts of non-compliant account holders and paying penalties. The penalties depended on when an account had been held or opened: 20 per cent of the maximum aggregate value for accounts existing on 1 August 2008, 30 per cent for accounts opened between that date and the end of February 2009, and 50 per cent for accounts opened later.⁸ The graduated scale punished most severely the banks that had taken over clients after the UBS settlement, when the risk could no longer be doubted.

The programme divided the Swiss banks into four categories. Category 1 comprised the banks already under criminal investigation, which were excluded and had to negotiate individually. Category 2 comprised banks that had reason to believe they had committed tax-related offences and sought a non-prosecution agreement. Category 3 was open to banks that could show through an independent investigation that they had committed no such offences and had effective compliance programmes. Category 4 covered banks that qualified as deemed compliant under FATCA.⁹ The decision on which category to choose required a bank to assess its own past conduct under American criminal law, often on the basis of incomplete files, and within a short deadline. Many Zurich banks commissioned internal investigations by law firms and forensic accountants, which became a significant source of work for the legal profession of the city.

The first resolution was announced on 30 March 2015. BSI SA of Lugano, one of the ten largest private banks in Switzerland, agreed to pay USD 211 million. The Department of Justice described numbered accounts that concealed the holders’ identities even from bank employees, sham companies and trusts, anonymous cards and coded language, in which a transfer of funds became a request to “download some tunes”.¹⁰ Between March 2015 and January 2016, eighty banks in Category 2 concluded non-prosecution agreements and paid penalties totalling USD 1.36 billion. Four banks and one cooperative bank satisfied the requirements of Category 3, while no bank was placed in Category 4. At the end of December 2016 the Department of Justice declared that the programme had entered its legacy phase.¹¹

Credit Suisse, Julius Bär and the Zürcher Kantonalbank

The banks in Category 1 settled on their own terms, and three of the most prominent were Zurich institutions. Credit Suisse had already been the subject of a report by the Senate Permanent Subcommittee on Investigations in February 2014, according to which the bank had maintained accounts for some 22,000 American clients holding USD 10 to 12 billion. The report described bankers who travelled to the United States on tourist visas to recruit clients and who concealed bank statements in magazines.¹²

On 19 May 2014 Credit Suisse AG pleaded guilty to conspiring to aid and assist American taxpayers in filing false returns. The total payment amounted to USD 2.6 billion, composed of USD 1.8 billion to the Department of Justice for the United States Treasury, USD 100 million to the Federal Reserve, USD 715 million to the New York State Department of Financial Services and USD 196 million paid earlier to the Securities and Exchange Commission. The Department of Justice stated that the bank had operated an illegal cross-border business for decades, using sham entities, destroying records, structuring transfers and providing offshore cards. The Attorney General, Eric Holder, declared that no financial institution was above the law, however large or global its reach.¹³ Unlike the UBS settlement, the plea agreement did not require the delivery of client names. It did, however, make the bank a convicted felon under American law, a status that the regulators in New York and Washington allowed it to survive.

The consequences of the plea extended into the following decade. After UBS had taken over Credit Suisse in 2023, it found undeclared American accounts, froze them and reported them to the Department of Justice. On 5 May 2025 Credit Suisse Services AG, a subsidiary within the UBS group, pleaded guilty to conspiring with American taxpayers to hide more than USD 4 billion in at least 475 accounts between 2010 and 2021. The bank admitted that Credit Suisse had breached its 2014 plea agreement, among other things by falsifying records. Between 2014 and June 2023 its Singapore branch had held undeclared American accounts with more than USD 2 billion in assets. The payments totalled USD 510.6 million, while UBS itself received a non-prosecution agreement.¹⁴ The episode showed that the legacy of the cross-border business could outlast both the business and the bank that had conducted it.

Julius Bär, the largest Zurich private bank specialised in wealth management, resolved its case on 4 February 2016. The Department of Justice filed criminal charges together with a deferred prosecution agreement that required a payment of USD 547 million. At its peak in 2007, the bank had held about 2,589 undeclared American accounts with some USD 4.7 billion under management, from which it had earned about USD 87 million in profit between 2001 and 2011. Two of its client advisers pleaded guilty on the same day.¹⁵ The agreement provided for the dismissal of the charges after three years if the bank complied with its obligations.

The Zürcher Kantonalbank, owned by the Canton of Zurich and backed by its guarantee, was among the last of the Category 1 banks. On 13 August 2018 the United States Attorney in Manhattan announced criminal charges against the bank together with a deferred prosecution agreement under which it paid USD 98.5 million. The bank had held about 2,000 undeclared accounts with peak assets of USD 794 million in 2008. According to the prosecutors, its clients had evaded more than USD 39 million in taxes while the bank earned some USD 21 million in profits from these accounts. Two former client advisers pleaded guilty, while a third remained a fugitive.¹⁶ The case of a bank owned by the canton illustrates how deeply the cross-border business had penetrated the Zurich banking landscape, including its public-sector part.

Notes

1. “US tax scandal brings down Wegelin”, swissinfo.ch, 27 January 2012, https://www.swissinfo.ch/eng/business/us-tax-scandal-brings-down-wegelin/32019008. ↩
2. Ibid. The article notes that Wegelin was the first standalone Swiss bank to sell its operations as a result of the American investigations. ↩
3. FINMA, “FINMA bewilligt die Übernahme des Nicht-US-Geschäfts von Wegelin durch Raiffeisen”, press release, 27 January 2012, https://www.finma.ch/en/news/2012/01/mm-wegelin-20120127. ↩
4. “US charges Wegelin with aiding tax fraud”, swissinfo.ch, 3 February 2012, https://www.swissinfo.ch/eng/business/us-charges-wegelin-with-aiding-tax-fraud/32056020. ↩
5. United States Attorney’s Office, Southern District of New York, “Swiss Bank Pleads Guilty in Manhattan Federal Court to Conspiracy to Evade Taxes”, 3 January 2013, https://www.justice.gov/usao-sdny/pr/swiss-bank-pleads-guilty-manhattan-federal-court-conspiracy-evade-taxes; see also “Swiss Bank Sentenced in Manhattan Federal Court for Conspiring to Evade Taxes”, 4 March 2013, https://www.justice.gov/usao-sdny/pr/swiss-bank-sentenced-manhattan-federal-court-conspiring-evade-taxes. ↩
6. “Nationalrat versenkt ‘Lex USA’ definitiv”, swissinfo.ch, 19 June 2013, https://swissinfo.ch/ger/steuerstreit_nationalrat-versenkt--lex-usa--definitiv/36205324. ↩
7. “Bundesrat präsentiert Alternative zur ‘Lex USA’”, swissinfo.ch, 3 July 2013, http://www.swissinfo.ch/ger/datenaustausch-schweiz-usa_bundesrat-praesentiert-alternative-zur--lex-usa-/36348192. The Federal Data Protection Commissioner, Hanspeter Thür, described the solution as a clear improvement on the rejected bill. ↩
8. United States Department of Justice, “United States and Switzerland Issue Joint Statement Regarding Tax Evasion Investigations”, https://justice.gov/tax/pr/united-states-and-switzerland-issue-joint-statement-regarding-tax-evasion-investigations. The release records that the Department had by then charged 68 American account holders and more than 30 banking professionals. ↩
9. United States Department of Justice, “Justice Department Reaches Final Resolutions Under Swiss Bank Program”, 29 December 2016, https://justice.gov/archives/opa/pr/justice-department-reaches-final-resolutions-under-swiss-bank-program. ↩
10. United States Department of Justice, “BSI SA of Lugano, Switzerland, First Bank to Reach Resolution Under Justice Department’s Swiss Bank Program”, 30 March 2015, https://justice.gov/archives/opa/pr/bsi-sa-lugano-switzerland-first-bank-reach-resolution-under-justice-department-s-swiss-bank. ↩
11. United States Department of Justice, “Justice Department Reaches Final Resolutions Under Swiss Bank Program” (n. above). ↩
12. “Levin: Time for IRS to tackle Swiss bank tax evasion. Again.”, Christian Science Monitor, 26 February 2014, https://www.csmonitor.com/layout/set/amphtml/Business/Latest-News-Wires/2014/0226/Levin-Time-for-IRS-to-tackle-Swiss-bank-tax-evasion.-Again. The underlying report is United States Senate, Permanent Subcommittee on Investigations, Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts, 26 February 2014. ↩
13. United States Department of Justice, “Credit Suisse Pleads Guilty to Conspiracy to Aid and Assist U.S. Taxpayers in Filing False Returns”, 19 May 2014, https://www.justice.gov/archives/opa/pr/credit-suisse-pleads-guilty-conspiracy-aid-and-assist-us-taxpayers-filing-false-returns. ↩
14. United States Department of Justice, “Credit Suisse Services AG Admits to Conspiring with U.S. Taxpayers to Hide Assets and Income in Offshore Accounts”, 5 May 2025, https://www.justice.gov/opa/pr/credit-suisse-services-ag-admits-conspiring-us-taxpayers-hide-assets-and-income-offshore. ↩
15. United States Department of Justice, “Criminal Charges Filed Against Bank Julius Baer of Switzerland with Deferred Prosecution Agreement Requiring Payment of $547 Million, as Well as Guilty Pleas of Two Julius Baer Bankers”, 4 February 2016, https://www.justice.gov/archives/opa/pr/criminal-charges-filed-against-bank-julius-baer-switzerland-deferred-prosecution-agreement. ↩
16. United States Attorney’s Office, Southern District of New York, “Manhattan U.S. Attorney Announces Criminal Charges Against Zürcher Kantonalbank”, 13 August 2018, https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-criminal-charges-against-z-rcher-kantonalbank. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.