UBS tax deal is Swiss bank secrecy's Waterloo

By Lisa Jucca

ZURICH (Reuters) - UBS's landmark settlement deal with U.S. tax authorities could be the final nail in the coffin for Switzerland's prized bank secrecy and will have far-reaching consequences for the whole offshore financial industry.

Under pressure from Washington, Berne agreed to let UBS (UBSN.VX)(UBS.N) pass on data of certain U.S. clients without waiting for an ongoing appeal process against the data transfer by some of these clients, an unprecedented step in Switzerland.

Switzerland's leading newspaper, Neue Zuercher Zeitung, called the $780 million (545.70 million pounds) settlement, which UBS agreed with Berne's blessing, a "capitulation".

"For Switzerland, it is a true catastrophe for the country's first industry, that is to say the banking sector," Geneva lawyer Charles Poncet, a former member of the Swiss parliament, told Radio Suisse Romande.

Switzerland is the world's biggest offshore centre, managing about a third of an estimated $7 trillion of wealth. The industry has prospered thanks to undeclared accounts that protect the privacy of ultra-rich customers, whether from potential kidnappers or from tax authorities.

Lawyers say other Swiss banks and all institutions involved in offshore banking should watch out as the U.S. tax axe may continue to grind.

"This is part of a general move towards greater transparency," said Stephanie Jarrett, a tax expert at law firm Baker & McKenzie.

Under Swiss law, bank data can be transferred to foreign tax authorities only in clear cases of tax fraud, not tax evasion. The latter is not a criminal offence in Switzerland. Clients have the chance to appeal against a data transfer.