The Zurich-based Bank Frey has called it quits, citing an inability to meet rising costs and obligations associated with the US tax evasion fight. The move was voluntary, as the private institution remains solvent and won’t be liquidated.
«As a result of developments in recent years, circumstances and challenges have presented themselves, especially in Switzerland, that mean it no longer makes sense for a small bank to continue its cross-border services,» said Markus A. Frey, thechairman of the board who founded the institution in 2000. «Bank Frey will therefore cease its operative business activities as a bank.»
Although the US Department of Justice (DoJ) recently offered Swiss banks a unilateral programme to address tax evasion and banking secrecy disputes, Bank Frey is part of the 14 «Category One» banks who could not participate because they are involved in ongoing legal proceedings.
In a statement, Bank Frey called itself the «subject» and not the «target» of the Americans’ tax evasion investigation, stating that it had fully complied with Swiss and US law and was not under indictment.
According to the Neue Zürcher Zeitung newspaper, the going got especially tough for Bank Frey after US authorities found it had been taking on American clients even after the tax evasion activities of UBS clients became widely known.
The head of the bank’s private banking services in Switzerland and a Swiss lawyer were charged in April with conspiring to help US clients use offshore accounts to hide millions of dollars from the Internal Revenue Service.
The investigation into Bank Frey’s activities showed that the bank had increased the number of its American clients by 300% between March 2009 and February 2012. As of September 2012, 44% of the institution’s managed assets came from American clients.
Frey is the second bank after Wegelin to cease its activities after being investigated by the Americans. Wegelin was forced to break up and effectively end its 271-year existence after being caught red handed poaching tax evading clients from UBS.