Secret no more

Swiss bank UBS will hand over details of 4,450 accounts to US authorities in order to settle a tax fraud case, the Swiss government said on Wednesday after signing a deal with the United States.

"The agreement between Switzerland and the United States has entered into force," the Swiss government said in a statement after a meeting in the capital Bern.

Douglas Shulman, the Commissioner of Internal Revenue in the United States, called the deal a "big victory" for the US, adding that it "blows a big hole" in banking secrecy.

"It is a huge victory for the US government," Shulman told Bloomberg Television, calling the deal an "unprecedented agreement."

In return for a decision by US authorities to abandon their lawsuit against UBS in the United States seeking to identify 52,000 US account holders, Switzerland has agreed "to deal within one year with a new request for administrative assistance relating to some 4,450 accounts," the Swiss government said.

"Unprecedented" amount of information to be shared

The US government said the agreement will unlock an "unprecedented" amount of information on potential American tax dodgers with accounts at UBS.

"The agreement retains the US government's right, if the results are significantly lower than expected and other measures fail, to seek appropriate judicial remedies, including resuming actions to enforce the civil complaint," the Internal Revenue Service (IRS) and the Justice Department said in a joint statement.

Last week the US government and UBS finalized a long delayed out-of-court settlement to end the diplomatically sensitive tax secrecy case aimed at forcing the bank to turn over the names of as many as 52,000 American account holders.

The case stems from a settlement of a criminal complaint earlier this year in which UBS admitted to tax fraud by inviting rich US clients to open accounts in Switzerland and thus avoid declaring their income to the US. The bank paid 780 million dollars to settle the criminal case.

Precedent-setting case

The IRS and Justice Department said that the agreement process will begin with an IRS treaty request to the Swiss government describing the accounts for which it is seeking information.

The Swiss government will then direct UBS to launch the handover of information on the accounts to the IRS.

The UBS agreement has implications for other banks, the statement said.

"The Swiss government has agreed to review and process additional requests for information for other banks regarding their account holders to the extent that such a request is based on a pattern of facts and circumstances equivalent to those of the UBS case."

Bern is also in the process of renegotiating its double-taxation agreements to better comply with the Organization for Economic Cooperation and Development's tax fraud articles.

An end to the UBS saga would bode well for the bank, analysts have said, noting that it would allow the Zurich-institution to stop the massive outflows of capital the uncertainty has created.

The Swiss government has a stake of around 6 billion dollars (4.2 billion euros) in UBS, after bailing out the bank last year. It is expected to begin moving out of the investment once the tax issue is resolved and it can turn a profit.

bn/AP/Reuters/AFP/dpa

Editor: Susan Houlton