Opening The Vaults; Is Bank Secrecy Over?

Others argue that UBS will likely cooperate with the request in order to continue doing business in the U.S.

"It would be a fatal move for the bank to dig its feet in," said Sandy Boucher of Intelysis Corp.

Boucher said that if the bank itself is found to have violated US law it could have a federal monitor assigned to oversee its future activities in the U.S.

"Rather than prosecute," said Boucher, "the bank will likely be given a rigorous series of things to do in order to avoid prosecution." Those requirements could include a thorough audit of past accounts and then a federal monitor assigned to the bank for a period of time to make sure it doesn't happen again.

As for the Swiss government, Boucher says that the Swiss will have to make a political decision on how to proceed with regard to their bank secrecy laws.

The US has a Mutual Legal Assistance Treaty (MLAT) with Switzerland to work on criminal cases but this does not include tax evasion. At the moment, the U.S. is saying that there have been no indications that the Swiss government will attempt to hold up the DOJ request.

"I'm not sure if we've had any particular communications with the Swiss, in terms of passing messages from the Department of Justice to them," said State Department spokesmen Tom Casey at yesterday's briefing. "As far as I know, though, I think there has certainly not been any diplomatic issue associated with this, that's come up."

Experts are wary to predict how the Swiss government will respond, but should they intervene that repercussions could be substantial.

"The reputational and financial risk is huge," said Boucher.

The Swiss Embassy did not return calls for comment.

This latest method for tracking tax evaders may spread beyond UBS and even beyond Switzerland. Experts point out that is has only become easier for the government to obtain records of foreign account holders. For example, the Cayman Islands have become more cooperative in turning over account information, which used to be very tightly held.

Indeed the IRS Commissioner warned that the long held secrecy of overseas banking is coming to an end.

"We will be taking additional steps to ferret out offshore tax avoidance beyond today's announcement involving UBS," warned IRS Commissioner Doug Shulman. "People should take notice that the secrecy surrounding these accounts is rapidly fading."

Kirit Radia contributed to this report.

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