Private Swiss Bank Closes Over Tax Evasion Dispute With U.S.

Private Swiss Bank Closes Over Tax Evasion Dispute With U.S.

Private Swiss bank Frey & Co AG announced that it’s closing its doors due to “unsustainable costs” stemming from the country’s dispute with the U.S. over alleged tax evasion. Frey will be the second bank – following Wegelin and Co. – to close after allegations of helping Americans evade U.S. tax law.

U.S. authorities have launched an investigation into several Swiss institutions for their complicity in tax law violations. A government program currently exists that enables Swiss institutions to voluntarily come forward and detail their actions in exchange for reduced penalty rates. Under the agreement, participating banks are required to disclose the amount of undeclared American assets on their books and pay related penalties. However, Frey is one of the 14 institutions ineligible for the program because it is already under investigation by the Department of Justice, Reuters reports.

Although Frey has not been indicted by the Justice Department, shareholders for the institution noted that increased regulatory scrutiny – and the costs associated with compliance – are too burdensome for the small bank. In addition, U.S. authorities have indicted Stefan Buck, the bank’s former head of private banking, for allegedly assisting Americans in hiding taxable income from the Internal Revenue Service, according to the Wall Street Journal.

“As a result of developments in recent years, circumstances and challenges have presented themselves, especially in Switzerland, that mean it no longer makes sense for a small bank to continue its cross-border services,” said Markus Frey, chairman of the board who founded the institution in 2000. “Bank Frey will therefore cease its operative business activities as a bank.”

Several Swiss institutions are currently under investigation for similar violations. The increased scrutiny is due in large part to the IRS’s attempt to close the multibillion-dollar tax gap, which the IRS estimates to be $385 billion.