Foreign Banks Refusing US Clients

USA Today is reporting that the Justice Department's court case with UBS is encouraging some foreign banks to shed some of the same US clients they used to welcome.

In a move to cover themselves, large international banking conglomerates, including Credit Suisse and HSBC have recently told American clients to close their offshore accounts or transfer them to the banks' U.S. operations, where tax reporting requirements are more strict.

"Overall, the international banking community, and particularly the offshore banking community, has been very friendly to American account holders," said William Sharp, a tax law specialist. "That changed in the past couple of months as a result of the UBS case."

The US courts have granted an adjournment until August in order to encourage a settlement in the UBS case. Prosecutors and attorneys for UBS and the Swiss government are currently negotiating. The Justice Department however complicated matters by releasing a statement on Sunday which said any deal must include information "on a significant number of individuals with UBS accounts."

Owners of HSBC accounts in Jersey, one of the English Channel islands, are getting notices to close accounts. Tax law specialists are reporting similar notices from clients with Credit Suisse accounts.

While at first the other Swiss banks were treating the UBS trial as an opportunity to gain market share, they've been less excited about adding US clients as the trial date got closer.

Apparently, foreign banks in other jurisdiction are getting more skittish about US clients because of reports that the Justice Department plans "to extend this effort to other jurisdictions beyond Switzerland."