Swiss lawmakers yesterday took upon themselves to safeguard the citadel of the country's secretive banking system as they rejected a deal in parliament to hand over 4,450 names of wealthy Americans who held secret offshore accounts with Swiss bank UBS.
 
Switzerland's lower house rejected a bill to approve the settlement arrived at between the governments of Switzerland, the US and UBS in August 2009, where the bank had agreed to reveal the names of 4,450 American clients suspected of tax evasion. (See: US breaches Switzerland's banking citadel; UBS to reveal 4,450 names) 

The rejection of the bill, which was voted 104 to 76, with 16 abstentions, came even as Switzerland's upper house had last week voted for it.

The bill would now go back to the upper house, which could decide to send it once more to the lower house for a fresh vote.

But prior to that, lawmakers will have to be sure that it would not be rejected once again and the lower house parliamentarians would have to convinced that it is in the best interest of the country that the bill is passed.

But Switzerland has only until 18 June to ratify the bill as the summer parliamentary session ends at that time.

Even if the lower house passes the bill, there is always the risk that the bill may be put to a popular nationwide referendum, just like Iceland did this year, when it was forcibly asked to repay money to the UK and the Netherlands for its banks, Kaupthing Singer & Friedlander and IceSave collapsing during the global financial crisis.

The case dates back to 2008, when the US Justice Department (DoJ began investigating tax evasion by US citizens, where UBS helped wealthy Americans to hide their money in secretive UBS accounts in Switzerland, (See: UBS under US investigation for tax evasion; senior executive detained) which led DOJ to file a lawsuit in a Miami court in February 2009 to compel Switzerland's largest bank by assets, UBS, to disclose the names of as many as 52,000 Americans who evaded paying tax in the US. (See: US justice dept hauls UBS to court to force disclosures)

The US later pared down the list to 4,450 names and the two countries signed an agreement in August 2009, under which the US agreed to drop a lawsuit filed in a Miami court in exchange for Switzerland agreeing to reveal and hand over data of 4,450 Americans holding offshore accounts with UBS.

Under the agreement, the US Internal Revenue Service (the US government tax collection and enforcement agency) had asked UBS to reveal the names in small batches starting from November 2009 and it is unlikely that the US government will extend that deadline.

Yesterday the US warned Switzerland of breaching that agreement and the DOJ could proceed with the case against UBS at the Miami court, where it may then be forced to reveal 52,000 names and also could be fined millions of dollars for each day delay in revealing the names.

The US regulators could also come clamping down heavily on UBS, which has wide operations in the US.