On October 17, 2013, Swiss Bank Frey & Co. AG announced that it had decided to cease business activities as a bank stemming from "increasingly difficult market conditions, ever-growing regulations and the unsustainable requirements that smaller private banks are required to comply with" related to the tax dispute with the United States. Dr. Markus Frey, Chairman of the Board, stated that "[a]s a result of developments in recent years, circumstances and challenges have presented themselves, especially in Switzerland, that means it no longer makes sense for a small bank to continue its cross-border services." The Bank is reportedly financially healthy and will not be liquidated.
Bank Frey reported in its Annual Report for 2012 that it was under a criminal tax evasion investigation by the Department of Justice, but the Bank was not under indictment. However, Bank Frey's decision to cease banking operations will not end the DOJ's investigation and an indictment is still a possibility. Bank Frey's decision follows the announcement of Switzerland's oldest bank, Wegelin & Co., who closed its doors following its indictment on tax evasion and plea deal in which it agreed to pay the DOJ $74 million in fines and restitution.
The DOJ and Switzerland's Federal Department of Finance announced in August a settlement program that offers amnesty to Swiss banks and resolution regarding involvement with individuals and entities that used Swiss accounts to evade US taxes and reporting requirements. The new program is similar to the IRS Offshore Voluntary Disclosure Program, which incentivized US taxpayers to report undisclosed foreign accounts to the IRS to reduce substantial civil penalties and eliminate the risk of criminal prosecution. However, Swiss banks currently under criminal investigation, including Bank Frey, are excluded from the disclosure program. Also weighing on Bank Frey was Switzerland's recent approval to amend the Swiss intergovernmentalagreement with the United States to implement FATCA, which must be implemented by July 1, 2014.
In April 2013, Bank Frey's former head of private banking and member of the Executive Board, Stefan Buck, was indicted in the United States along with Edgar Paltzer, a Swiss lawyer, with conspiracy for assisting US taxpayers to file false tax returns and committing tax evasion. Buck remains at large. Also on the run was Raoul Weil, former head of UBS's Global Wealth Management division, who was indicted by the DOJ in 2008 for conspiring to defraud the US by helping US clients conceal taxable accounts. The indictment alleged that Weil conspired with others to help Americans conceal nearly $20 billion in Swiss bank counts. Weil was recently arrested by Italian police in Bologna, and faces possible extradition to the United States for aiding and abetting tax evasion. The DOJ's aggressive stance directed at the Swiss banking community appears to have claimed another victim, but time will tell if other Swiss banks follow Frey's decision to cease operations.
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