Swiss bank Frey eyes U.S. branch to head off tax probe - sources

Mon May 6, 2013 8:50am EDT

* Frey's head of private banking faces U.S. tax charges

* Bank's move could be template for others

By Martin de Sa'Pinto

ZURICH, May 6 (Reuters) - Switzerland's Bank Frey may seek to open in the United States and bring American customers onshore in an attempt to fend off possible investigation into suspicions that it helped U.S. clients to evade taxes, Swiss-based sources said.

The bank is considering applying for a licence to serve U.S. clients from the United States, two industry lawyers with knowledge of the matter told Reuters. A source close to Swiss regulator FINMA said the bank told the body that it was looking into opening a U.S. branch.

If successful, the strategy could become a template for other banks in the U.S. taxman's sights, the legal sources said.

"They are saying, in effect, that they will work together with the regulators to resolve any overhanging problems, and broadening their way into the U.S. market at the same time," said a Zurich-based investment consultant who works closely with the bank.

Bank Frey's head of private banking, Stefan Buck, and lawyer Edward Paltzer, a partner at law firm Niederer Kraft & Frey, were charged in April with helping American clients to hide millions of dollars in offshore accounts to avoid paying taxes.

Frey, one of the smaller Swiss private banks, with less than 2 billion Swiss francs ($2.14 billion) under management, said last month that it was the "Swiss Bank No.1" named in the indictment against Buck and Paltzer.

Several Swiss banks, including Credit Suisse and Julius Baer, are under investigation for helping wealthy Americans to evade tax. Switzerland's oldest bank Wegelin said in January that it would close after pleading guilty to helping rich Americans to avoid taxes.

Bank Frey's acting chief executive Flavio Battaini declined to comment on whether the bank plans to apply for a U.S. licence.

Like Wegelin, Bank Frey drew the attention of U.S. tax authorities when its client assets jumped after 2009, the year Switzerland's largest bank UBS paid a $780 million fine for helping Americans to evade taxes.