UBS halts U.S. offshore services amidst tax probe
SOURCE:
Reuters
2008-07-17 13:49:13
WASHINGTON (Reuters) –
UBS AG (UBSN.VX) will stop providing
offshore private banking services to U.S. residents through
unregulated entities, the Swiss bank said on Thursday at a
congressional hearing on overseas tax-dodging.
A senior UBS executive apologized to a Senate investigative
subcommittee that released a new report at the hearing claiming
that thousands of wealthy Americans are avoiding taxes by
hiding their assets in Switzerland and Liechtenstein.
Mark Branson, chief financial officer for UBS Global Wealth
Management and Business Banking, said the bank’s 80,000
employees were alarmed by reports of misconduct.
“They want to know that such misconduct does not belong in
UBS and that the firm’s ethics match their own,” Branson said.
“I am here today to tell you and to tell them that no, that
kind of misconduct does not belong in UBS.”
Branson said UBS was working with the U.S. government to
identify U.S. clients who may have engaged in tax fraud.
The Senate Permanent Subcommittee on Investigations’ report
claimed that UBS and another institution, LGT Bank, located in
Liechtenstein, helped many U.S. citizens dodge taxes.
Lawmakers claim that through elaborate schemes at many
banks in dozens of tax haven nations, U.S. citizens annually
avoid $100 billion in tax payments. The report accused tax
haven nations of engaging in “economic warfare against the
United States and honest hard-working American taxpayers.
The subcommittee said UBS had an estimated 19,000
“undeclared accounts” for U.S. citizens hiding $18 billion in
assets from the Internal Revenue Service.
On its change in business practices, UBS said it would ask
affected U.S.-domiciled clients to transfer their banking
relationship to one of its three U.S.-regulated units.
“UBS Wealth Management Americas continues to operate as it
always has and is not affected by today’s announcement, except
that some clients who used to have their accounts in
Switzerland may transfer their accounts into that business,”
the bank said in a statement distributed after the hearing.
Subcommittee Chairman Sen. Carl Levin, a Michigan Democrat,
said he was surprised by UBS’ announcement.
“Other banks engage in these kind of tactics and we have
got to find other ways legislatively and by regulation to end
the abuses of these tax havens which are draining off, we
believe, up to $100 billion a year,” Levin told reporters.
At LGT, a small institution controlled by Liechtenstein’s
royal family, “secrecy was a deeply embedded way of life,”
subcommittee investigators said in their latest report on an
internationally coordinated inquiry begun in February.
Investigators claim that LGT used code names for clients,
told its bankers to use pay phones to call clients, and
“created elaborate, deceptive offshore structures.”
LGT issued a statement at the hearing saying it has
cooperated with the panel and has “always been and continues to
be in compliance with pertinent laws and regulations.”
IRS commissioner Douglas Shulman urged the panel on
Thursday to give authorities more time to audit taxpayers who
have used foreign entities and bank accounts to avoid taxes.
In May, two former UBS bankers, Bradley Birkenfeld and
Mario Staggl, were indicted and accused of helping a U.S.
real-estate developer hide $200 million in assets from tax
authorities. On June 19, Birkenfeld pleaded guilty in federal
court in Florida to conspiring to defraud the IRS.
According to Birkenfeld’s court statement, UBS employees
assisted wealthy U.S. clients in concealing their ownership of
assets held offshore by creating sham entities and then filing
IRS forms falsely claiming the entities owned the accounts.
The Swiss finance ministry said on Thursday it had received
a request for help from the Internal Revenue Service in
connection with alleged tax evasion schemes at UBS.
(Reporting by Rachelle Younglai and Kevin Drawbaugh in
Washington, with Eva Kuehnen in Zurich; Editing by Toni
Reinhold)
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