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Switzerland’s largest bank agrees to disclose secret

19 February 2009 17:22 (UTC +04:00)

Bakuâ€“ APA-Economics. UBS AG agreed to pay $780 million for helping U.S. customers avoid taxes, the Department of Justice said Wednesday, MarketWatch reported.
Switzerland’s largest bank also agreed to turn over the identities and accounts of some of its U.S. clients to the American government, in an unprecedented move that could shine a light into the country’s secretive banking industry, the DOJ added.

UBS entered into a deferred prosecution agreement on charges of conspiring to defraud the U.S. by impeding the Internal Revenue Service. The government will dismiss the charges if the bank fulfills its obligations under the agreement, the DOJ explained.
"A veil of secrecy has been pulled aside," John DiCicco, acting assistant attorney general of the Justice Department’s Tax Division, said in a statement. "We will continue to aggressively pursue those who shirk their federal tax obligations or assist others in doing so."

In June, a U.S. District Court gave the IRS permission to serve UBS with a so-called John Doe summons. The summons demands information that would help track down U.S. taxpayers with UBS Swiss bank accounts that they’ve been trying to hide from the IRS. Usually, such summonses have to specifically name individuals, so the broader John Doe version has the potential to uncover many more possible tax evaders.
Some of UBS’s 20,000 U.S. clients knowingly concealed roughly $20 billion in assets held in accounts at the bank and "willfully" evaded U.S. taxes due on income earned on these secret accounts, Federal prosecutors alleged in court documents unsealed on Wednesday.

"These taxpayers should note that today’s agreement states that the U.S. Government will continue to seek enforcement of the summons," IRS Commissioner Doug Shulman said in a statement. "If the bank fails to comply with a final order to produce the information, the U.S. government may deem UBS to be in violation of the agreement."
"People who have hidden unreported income off shore need to get right with their government," he added.

The Swiss Financial Market Supervisory Authority has ordered UBS to transfer information the DOJ about accounts of some U.S. clients who appear to have committed tax fraud, the bank said in a statement.

"Client confidentiality, to which UBS remains committed, was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of bank personnel, misused the confidentiality protections embedded in the QI Agreement with US authorities by providing false declarations regarding their tax status," UBS Chairman Peter Kurer said.

After UBS bought brokerage firm PaineWebber in 2000, the Swiss bank agreed to tell the IRS about U.S. clients who held U.S. securities in a UBS account. As part of this Qualified Intermediary Agreement, or QI Agreement, UBS also agreed to withhold income taxes from U.S. clients who invested in foreign securities from the U.S.
Instead, UBS employees and managers helped U.S. taxpayers open new accounts in the names of nominees or "sham" entities to avoid the new reporting requirements, the DOJ alleged. Some UBS executives knew about the scheme too, it added.
Swiss bankers often traveled to the U.S. to market Swiss bank secrecy to U.S. clients interested in trying to evade income taxes. In 2004, they came roughly 3,800 times to talk about clients’ Swiss bank accounts, according to court documents.
UBS managers and employees used encrypted laptops and "other counter-surveillance techniques" to avoid being caught and keep the identities of their clients secret, the DOJ said.