Swiss banks seeking to avoid U.S. prosecution by disclosing how they helped Americans evade taxes asked the Justice Department this week to back off a dozen demands, including that they cooperate with other nations.

Lawyers representing 73 Swiss banks wrote on Oct. 21 to object to terms of a proposed non-prosecution agreement that spells out how banks can achieve amnesty through a disclosure program announced last year. The 11-page letter says the agreement “presents substantial obstacles” and suggests a wide range of changes to the model accord, including a requirement that banks “cooperate fully” with “any other domestic or foreign law enforcement agency” in any investigation.

“This requirement is not found in the program and, indeed, turns a program specifically focused on U.S. tax issues into a global cooperation agreement without any safeguards or guarantees of appropriate consideration of the banks’ cooperation,” according to the letter from 18 law firms obtained by Bloomberg News.

More than 100 firms, or about a third of Swiss banks, signed up for the program in December, seeking to end a six-year crackdown on the world’s largest offshore haven. The banks want certainty that they can put their past behind them without threats from the Internal Revenue Service. The letter protests that the model accord proposed by the Justice Department’s tax division doesn’t provide that assurance.

“Our clients are participating in this program to obtain finality as to their own exposure,” the law firms wrote. “We understand that the NPA does not bind the IRS formally, but it is important to our clients’ continuing participation through the conclusion of the NPA that we receive some form of assurance that the IRS will forebear from any further action.”

Parent Companies

The banks also object to requirements that they disclose information on parent companies and that they share material with governments other than the U.S. And they dispute the scope of provisions on breaches of the agreement.

“The model agreement goes quite far from the perspective of the banks,” said Philippe Zimmermann, who advises financial firms on compliance matters for Ernst & Young in Zurich. “The banks now have to find a way of negotiating with the Justice Department.”

Switzerland is just one stop in the U.S. crackdown on offshore tax evasion. The Justice Department has also built criminal cases based on offshore accounts in India, Panama, the Cayman Islands, Hong Kong, Liechtenstein, Israel, and Bermuda. Switzerland is already under pressure from India to turn over bank data on tax dodgers, while France, Italy and Germany continue to try to recover back taxes from citizens who used Swiss bank secrecy to hide assets.

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