Switzerland’s oldest bank is to shut down after it admitted to helping American clients evade $1.2bn in taxes.
Wegelin becomes the first foreign bank to plead guilty to tax evasion in the U.S and must pay $57.8m (Â£36m) in fines to the US authorities.
Once it has paid off its fines it will ‘cease to operate as a bank.’
The bank, established in 1741, confessed to allowing more than 100 American citizens hide $1.2bn from the Internal Revenue Service for nearly a decade.
America’s recent crackdown on tax evaders and offshore accounts discouraged Swiss banks from taking on U.S. customers.
But Wegelin, based in the Swiss town of St Gallen did not follow suit.
US Attorney Preet Bharara told the BBC: ‘The bank wilfully and aggressivelyÂ jumped in to fill a void that was left when other Swiss banks abandonedÂ the practice due to pressure from US law enforcement.
‘It is a watershed moment in our efforts to hold toÂ account both the individuals and the banks – wherever they may be in the world – who are engaging in unlawful conduct that deprives the USÂ Treasury of billions of dollars of tax revenue.’
The crackdown started around 2007 with an investigation of UBS AG,Â Switzerland’s largest bank.
The ruling has caused panic among other Swiss banks such as Credit Suisse, who are also under investigation
In this particular case UBS and US prosecutors settled on a deferred prosecution agreement, with the fine being paid in exchange for the charges being dropped against the bank.
The crackdown continued, however and incorporated the entire SwissÂ banking industry.
Dozens of U.S. clients and at least two dozen Swiss bankers have been charged, in moves that have strained U.S.- Swiss relations.
Wegelin’s chiefs admitted to the New York court that theyÂ knew what they were doing it was wrong, but thought they could avoid prosecution because their actions were deemed legal in Switzerland.
Potentially it has severe implications for other Swiss banks such as Credit Suisse, who are also under investigation.
A partner at the bank said that Wegelin had protected US clients from tax betweenÂ 2002 and 2010, knowing full well that it was wrong.
Switzerland has been locked in talks with the U.S. for months in a bid to protect the anonymity of its U.S. clients – an outcome that looks increasingly unlikely in the face of Wegelin’s closure.
been trying for months to negotiate a deal with the US which would protect Switzerland’s banking secrecy.
The indictment is a blow to a national tradition of banking secrecy that dates back to the Middle Ages.
After Wegelin was first indicted by US authorities in February 2012 and declared a fugitive from justice when representatives failed to appear in court. The US allegations forced the bank to sell off its Swiss and other non-US businesses.
Wegelin originally said it would fight the charges, claiming that because it only had branches in Switzerland, it was accountable only to its own country’s relaxed finance laws.
Wegelin is a small bank where eight partners hold unlimited liability for its operations. It has no U.S. offices or branches and it conducted its tax evasion business in part through correspondent banking accounts at UBS in Stamford, Conn.