[DfrtYhyu]

The End of Swiss Banking as We Knew it?

Posted by: Stanley Reed on February 19

In 2005 I interviewed Peter Wuffli, then the CEO of Swiss Bank UBS. I asked him how he felt about Swiss bank accounts being used by citizens of other countries to hide funds from the taxman. This is how he responded:

“We have a very clear distinction between tax fraud, which is a criminal offense, and tax avoidance, which is not a criminal offense.”

For UBS and other Swiss banks this sort of thinking has justified allowing the wealthy and not-so-wealthy of the world to use Swiss financial institutions to hide money away from the prying eyes of tax men everywhere.

Now, that lucrative practise, which has contributed to the cozy, lakeside splendor of Zurich and Geneva, the main Swiss banking centers, is very much under threat. Under a deferred prosecution agreement, UBS has ageed to provide the U.S. government with the identifies of and account information for, certain U.S. customers of UBS’s cross-border business “who appear to have committed tax fraud or the like”.

UBS has also agreed to pay $780 million in disgorgement of profits from maintaining cross-border accounts as well as unpaid taxes associated with fraudulent sham nominee and offshore structures.

According to a statement from the U.S. Attorney of the Southern District of Florida in Miami, When UBS bought its Paine Webber brokerage in 2000, the bank voluntarily agreed to report to the Internal Revenue Service income for its U.S. clients. Instead, the document says, certain UBS executives helped clients set up new accounts in the names of nominees and/or sham entities. This device was used by UBS to justify evading its reporting obligations, the statement says.

With a large U.S. brokerage and investment banking business, UBS was extraordinarily reckless. These actions, knowledge of which seemed to go quite high if not to the top of the bank, put all of these activities in danger. “It is apparent that as an organization we made mistakes and that our control systems were inadequate,” CEO Marcel Rohner said in a statement.

While its not clear how many accounts will be subject to this agreement, American clients must be quaking in their boots. Some have already been pursuing settlements with the IRS. Tax-evading clients from other countries, notably Germany, and the Swiss private banking industry, which thrives on their stashed wealth, must also be very worried. If the U.S. can successfully pressure UBS into revealing sensitive information on clients, then other jurisdictions may also hope to be successful.

UBS is trying to limit the number of accounts that it will be forced to reveal. The U.S. government has filed a civil suit asking a court to order UBS to disclose all secret accounts of U.S. customers. According to the lawsuit, as many as 52,000 U.S. customers hid their UBS accounts from the government. As much as $14.8 billion in assets may be involved. UBS says it will fight the suit.

Peter Kurer, who took over as Chairman of UBS from Marcel Ospel last year commented: “Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of clients, who, with the active asistance of bank personnel, misused the confidentiality protections…”

Maybe so, but it is difficult not to think that UBS and other Swiss banks are more and more going to be forced to earn their living from providing superior wealth management and other services and not just rely on the attractions of secrecy. UBS has said in the past that it is committed to doing just that, but some of the bank’s executives obviously couldn’t resist the easy money available from aiding tax evasion.

[TerAlelmlor]

they can put the money in singapore bank

which is good