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LONDON - Move over, Iran and North Korea: Americans are the new outcasts of banking.
Swiss and other European banks have begun distancing themselves from American clients in the wake of UBS' spat with U.S. tax authorities, either by closing existing accounts or rejecting new applications.
Banks, particularly smaller Swiss ones, are "actively closing" accounts of Americans resident in Switzerland, as well as those of U.S.-domiciled Americans, said David Treitel, tax director of London-based U.S. Tax & Financial Services. Similar cases have begun to spring up in Britain, too. "Clients are being told, 'We'll be closing your accounts; you have X-number of days left,'" he said, adding that Americans were becoming "increasingly unpopular" among large foreign banks.
European banks have always treated American clients with caution, but their attitude has changed dramatically ever since the Department of Justice began demanding that UBS hand over the details of some 52,000 clients suspected of evading U.S. taxes. The dispute has left UBS between a rock and a hard place: it will break Swiss secrecy laws if it hands over the information, but face punitive action from the U.S. government if it doesn't.
According to Don Curtis, chief executive of Geneva-based Curtis & Co., Swiss banks are closing accounts of American clients across the board, ranging from pension to securities to current accounts. The placement of funds and securities have been the most affected, according to Stuart Hearn of Carouge, Switzerland-based Compta Center.
A spokesman for UBS said that nothing had changed since last year, when the bank announced it would be exiting its offshore services for U.S.-domiciled clients. Swiss-domiciled American clients would, however, continue to be able to open regular current or business accounts.
"Banks are very worried about the administration costs and financial regulation," said Treitel. "They see taking the business as too costly or as too invasive of privacy."
Panama yields to pressure concerning its lax banking laws

Panama said it would make certain adjustments to its banking system recommended by the Organization for the Cooperation and the Economic Development (OECD) and the G-20 Summit leaders, which have often criticized the country for being a fiscal paradise.
Though in a formal statement the country said it acknowledged that "times have changed" and that it will no longer be able to remain "isolated within the world," Vice Minister of Economy Frank de Lima said that the new administration intends to demonstrate that Panama is not a fiscal paradise and will demand recognition of the domestic tax system.
“We will ask for the Member States of the OECD that respect that concept, but that we are conscious that we must make changes in one way or another," explained the vice minister. One change, he said, would be to follow the route Switzerland has taken through the negotiation of treaties for a more transparen exchange of tax information.
De Lima contended that Panama can no longer risk being blacklisted or subjected to sanctions, as France and the United Kingdom have threatened.
Banks in the country have also consented to change their way of business.
Federico Humbert, president of Banco General, said it is important that the banking community understand the economic impact of the OECD pressure and explained that it “would be irresponsible” not to take appropriate actions.
“We at Banco General have already adopted stricter measures to be able to eliminate the obsolete principle of the anonymous client that is protected in joint-stock companies," said Humbert. "We will be adapting other policies to better identify the client."