On January 3rd 2012 three bankers from Wegelin & Co., the 270 year-old Swiss private bank were accused in New York of conspiring to help US clients hide more than $1.2bn from American tax authorities. From that point things happened quickly. Wegelin & Co., announced on January 27th that it was breaking up and moving most of its employees and clients with their Swiss francs 21billion to Notenstein Private Bank which was then bought by the Swiss Cooperative Bank, Raiffeisen, for an undisclosed sum.

The New York prosecutors alleged that from 2002 to 2011 Wegelin Bank and the three bankers, and others, had conspired with 100 US taxpayers to hide American clients’ Swiss deposits from the Inland Revenue Service. According to the indictment, the bank held more than $1.2bn in undeclared assets this year which the IRS considers to be undeclared US citizens’ assets.

The events are part of the IRS’s campaign against what they see as tax evasion using Swiss banks. The IRS seem to be making progress following the action of UBS in 2009 when the bank managed to avert a criminal indictment by handing over 250 sets of data to US authorities on an emergency order by Finma, the Swiss regulator, even though contravening Swiss banking secrecy. This resulted in US and Swiss officials cooperating to clean up Swiss bank and to make good past transgressions. The negotiations involving UBS are now seen as a blueprint for negotiations between Swiss banks and the IRS, particularly since the US seized more than $16 million from UBS Stanford, Connecticut, branch which actually served as Wegelin’s correspondent bank. Credit Suisse has put aside money towards paying fines to the US over offshore accounts and Julius Baer has come under intense scrutiny. The prosecutors allege that Wegelin and the three bankers took over many of UBS’s previous American clients and are alleged to have opened new undeclared accounts for at least 70 taxpayers.

These recent actions have caused apprehension in Zurich and Geneva. One Geneva banker is reported by Reuters as saying “It seems the US is shooting at everything in sight and we don’t know when it’s going to stop; I think the chances of another bank being indicted are pretty big.” So far, the Swiss Finance Department, Foreign Ministry and Regulator, Finma, have been silent and no comment has come from Konrad Hummler who normally enjoys criticising US officials contrary to the normal retiring and modest behaviour of Swiss bankers. It is considered that Hummler’s error was assuming that the Wegelin bank was safe from US indictment because the bank did not have any US-based branches.

The indictment has come at the time of US/Swiss talks to resolve the probe into Swiss banking activities with attempts to reach a settlement with Swiss banks and to resolve criminal investigations into 11 of them. The indictment also dovetails with a US amnesty programme which was launched to induce taxpayers to put their matters in order and follows two previous s programmes.

The sudden sale of Wegelin & Co., was stimulated by the threat of the indictment abut, in its statement of 27th January 2012, Wegelin said that the risks and responsibilities that went with its US business would remain with the current partners.