The days of secret bank accounts are numbered for U.S. taxpayers and European tax dodgers should also watch out after the United States and Swiss bank UBS AG agreed to settle a tax evasion case.

Details of the deal were not made public after the settlement was initialed Wednesday.

But tax experts expect the settlement to involve the disclosure to U.S. tax authorities of thousands of names of U.S. residents suspected of using secret Swiss accounts to conceal assets, albeit without formally breaching Swiss bank secrecy.

It is clear that U.S. citizens that formally believed they could hide money in Switzerland and other offshore centers will now conclude it is not safe, said Michael Weinstein, a lawyer at law firm Cole Schotz who is advising UBS clients.

The deal is going to force individuals to come forward and reveal those secret accounts voluntarily. If not, UBS will.

UBS has already promised to stop offering offshore accounts to U.S. citizens and is closing down existing undeclared accounts.

Many other Swiss and foreign banks have also already started to kick out U.S. holders of secret accounts or force them to comply, leaving them little room to hide in anticipation of further action by the U.S. Internal Revenue Service.

For U.S. taxpayers it is going to be impossible to hide money in Switzerland and it is just a matter of time that this is the case also for Germans and Britons, Asher Rubinstein, a partner at law firm Rubinstein & Rubinstein, said. Switzerland will no longer be a tax haven. Tax lawyers say many of UBS's competitors are sending letters to U.S. clients asking them to transfer their funds to a U.S. tax-compliant entity.

However, some secret account holders, who range from well-traveled businessmen to Jewish families who had fled hostile countries, could not stomach transferring between 40 and 60 percent of their hidden fortunes to U.S. tax authorities.

For every three to four clients that come here, there are one or two who, when we do the numbers, say: I cannot write a check that big. I will take my chances, Rubinstein said.

EUROPEAN ACTION?

UBS Chief Executive Oswald Gruebel said earlier this month he expects the bank's tax dispute to prompt action from European governments as well as higher costs for private banks.

Other governments will closely watch what is going on there, Gruebel told reporters. It is not a very good development for the wealth management industry. There will be additional costs for compliance, but then, on the other side, one should not help other people to evade taxes.

European governments have already been fighting tax dodgers and Germany went as far as to pay for client data stolen at Liechtenstein's biggest bank LGT about a year ago.

The affair triggered massive client withdrawals from the tiny banking secrecy stronghold, which has since agreed to be more tax transparent to save its financial industry. This week, Liechtenstein signed a deal with Britain to push 5,000 investors in Liechtenstein to disclose accounts.

It is good that the Swiss government supported the UBS solution, but they have to be aware that there will now also be many similar discussions with other countries, said Thomas Borer, a former top Swiss diplomat.

But the devil is in the detail and tax transparency advisers said the UBS settlement could disappoint as it will not likely involve any automatic exchange of information.

Switzerland will do away with its artificial distinction between tax evasion and tax fraud, but will not go as far as totally lifting the veil from its clients' accounts.

Swiss banks have helped each other to break laws, in the age of globalization, that has to change, Raymond Backer, a director at non-profit organization Global Financial Integrity. There is no place for Swiss bank secrecy.

Private banks will have to learn to live in a world where bank secrecy is not a competitive advantage, at least when it comes to U.S. and European citizens.

Pressure (on Switzerland) has become massive and we are in a phase were countries' public deficits are very, very high, Deutsche Bank Chief Executive Josef Ackermann, a Swiss, told a conference last week when asked about the UBS tax issue.

Can we maintain the difference between tax fraud and tax evasion? The answer is no.

Privacy Investment