Laura Szarmach (J.D. 2011, Cornell) has published Note, Piercing the Veil of Bank Secrecy? Assessing the United States’ Settlement in the UBS Case, 43 Cornell Int’l L.J. 409 (2010). Here is the Conclusion:
The IRS had some reason to celebrate the settlement of the protracted UBS summons enforcement case. This was the first major IRS offshore banking enforcement action in years and the first against a major Swiss bank. Moreover, the amount of information on offshore tax evaders that the IRS is set to receive is unprecedented. At the time of settlement, the IRS expected it would receive information on 4,450 accounts of taxpayers who had hidden money offshore in a UBS account. It also expected more information to come from its voluntary disclosure program and even hoped that the Swiss would follow through on their promise to cooperate in the investigation of other Swiss banks found to be assisting tax evasion by U.S. residents. Finally, one cannot overlook the deterrent effect of the settlement, both on foreign banks who assist in creating offshore accounts and on U.S. citizens contemplating opening an undisclosed foreign account.
On the other hand, the agreement to receive the names through a treaty request and to dismiss the summons represented an unfortunate miscalculation by the United States. The law was on the side of the United States to compel enforcement of the summons. But the United States seems to have fallen for the Swiss bargaining chip— a promise to renegotiate the tax treaty between the two countries to include information exchange standards meeting the OECD model. The OECD standards, however, are useless in most cases of offshore tax evasion because of the specificity they demand. Thus, not only must the United States now cope with a treaty process that will yield fewer names than if the summons had been enforced, the United States will gain very little from the new treaty going forward. The delays in the treaty process resulting from the Swiss court ruling rejecting the August 2009 agreement make the bargain appear even less defensible.
Finally, even if the case represents progress in the effort to end bank secrecy abuses, this does not mean that the fight is over. The case exposed the extent to which foreign banks in bank secrecy jurisdictions have been routinely selling tax evasion services to Americans and other wealthy individuals around the world, underscoring that UBS is just one small part of the problem. To truly capitalize on the resolution of the UBS case, the IRS must expend the necessary resources to pursue all leads from the information it has received. Now that the IRS has taken an initial step in attacking large-scale offshore tax evasion, it is in a unique position to continue to demand information disclosure and the loosening of bank secrecy.
