Finally, after more than 400 years of dogged resistance, the Swiss authorities have agreed to lift the much-vaunted veil of secrecy over banking transactions in their country.

Last week, UBS AG, Switzerland’s largest bank, announced that it would pay $780 million to the US government and disclose the names of American depositors suspected of having opened bank accounts to evade US taxes.

Reputed to be Switzerland’s real central monetary authority, UBS took the move to stave off the enforcement of a subpoena issued by a US court in connection with a tax evasion case, which ordered the bank to disclose information about accounts owned or controlled by American citizens.

Had the subpoena been served and disobeyed, the bank could find itself facing a criminal contempt charge with disastrous consequences.

Its bank officials can be arrested if they step into US territory and detained indefinitely until the bank complies with the order.

In case the US authorities decide to push the envelope, the court can put the squeeze on UBS’ funds in the US, including its transactions in American banks operating in the mainland and other parts of the world.

The pressure play and attendant adverse publicity could bring UBS, which is already reeling from the effects of the global financial crisis, down on its knees.

Confidential

In an effort to mitigate the effects of its action, UBS came up with the spin that some of its personnel failed to follow certain compliance and documentation requirements in the processing of the said bank accounts.

Regardless of the true reason for the change of heart, it is apparent the “law on unintended consequences” has caught up with the favorite haven of ill-gotten wealth of the world’s dictators, crime lords and other dregs of society.

The much-ballyhooed strength of the Swiss banking system has not made its banks immune to the infection caused by the once-in-a-century financial meltdown.

With its existence at serious risk, violating the vow of secrecy to its depositors was a price UBS had to (grudgingly) pay.

In times past, no amount of criticisms and fervent pleas could sway Swiss authorities into relaxing secrecy rules, to enable citizens of countries whose leaders stashed their stolen wealth in Swiss banks to look into those deposits and recover their proceeds.

The banks stuck to the mantra of confidentiality in banking transactions, regardless of the manner by which that money was “earned” or the character of their depositors.

Remedies

The bankers didn’t care if the disclosure and release of the loot could help ease the sufferings of citizens of countries from whose coffers the deposits were stolen.

From the banks’ perspective, how or where the deposits are sourced is none of their business. That becomes material only if their attention is called to it by their regulators, which is rare.

True, Switzerland has a law that requires its banks not to accept deposits that appear or are suspected to have come from illegal sources or were obtained through fraudulent means, under pain of criminal sanctions.

It has also has a law that lifts the confidentiality of bank deposits upon orders of a Swiss judge in cases involving violation of serious criminal laws.

Since “suspicion” is a matter of gut feeling, an employee who has a bank-imposed deposit objective to accomplish and whose salary depends on meeting that quota can always claim good faith in processing the accounts of depositors that are supposed to be on the watch list.

Going through the judicial process is not a piece of cake either.

Judging from the laborious process that attends cases filed to avail of that remedy, the Swiss judicial system seems to be unsympathetic, if not hostile, to any move that may put a dent on Switzerland’s reputation as a staunch defender of the sanctity of bank accounts.

Precedent

The decision of UBS to lift the secrecy veil over the accounts of its American depositors may be considered the “leak in the dike,” whose effects will soon be felt by the rest of the Swiss banking system and other tax havens in the world.

Although meant to address a specific case, the settlement arrangement between UBS and the US government does not bar the latter from filing a similar action in the future against other Swiss banks for complicity in tax evasion by Americans.

Unlike Switzerland where tax evasion is not considered a crime (perhaps an art?), the US is hot against Americans who refuse or fail to meet their tax obligations.

Whatever information may be gathered from UBS’ disclosure can be used by the US government to justify prying into the accounts of Americans in other Swiss banks for possible violation of US tax laws.

The hunt for illegally stashed money may become more intense in the wake of the $50-billion investment scam attributed to Bernard Madoff, and recently, the $8-billion securities fraud case filed against Allen Stanford.

A serious clash between US and Swiss laws on secrecy of bank deposits is in the offing. If only to protect its image in the financial world, expect Switzerland to put up a tough fight.

The reply of a Swiss banker to my question about his country’s fanatical devotion to bank secrecy says a mouthful: It needs the income from bank deposits because it cannot survive on chocolates, watches and tourism.

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For feedback, please write to rpalabrica@inquirer.com.ph.