Post by Todd Smiley on Feb 20, 2009 16:02:21 GMT -5
It looks like a few countries are trying to get some money back from the wealthy who have been hiding it in Swiss offshore bank accounts over the years.
www.iht.com/articles/2009/02/20/business/20ubs.php?page=2
The info is from this link,
"The UBS memo was blunt: the "Swiss solution" could help affluent U.S. clients.
That message, sent to the bank's executives in July 2004, referred to a UBS plan to help rich customers evade taxes by hiding money in offshore havens like the Bahamas.
The memo, along with dozens of e-mail messages like it, were disclosed Thursday in a blistering court document filed by the U.S. Justice Department, which sought to compel UBS, based in Switzerland, to divulge the identities of 52,000 U.S. clients whom the authorities suspect of using secret offshore accounts at the bank to dodge taxes.
The move opened a new, unexpected front against UBS, which a day earlier had agreed to pay $780 million to settle claims that it defrauded the Internal Revenue Service, and against Switzerland's long tradition of banking secrecy.
The number of clients the authorities are seeking to identify is far higher than previously believed, raising new questions about the scale of UBS's activities and the number of U.S. clients who could be snared in the investigation. U.S. government authorities initially focused on 19,000 accounts, and UBS turned over about 250 names Wednesday. That figure now seems certain to grow.
The court document alone dealt a stinging blow to UBS, whose corps of private bankers discreetly tend the fortunes of billionaires and multimillionaires. Filed in a Miami court, the papers provide a rare inside look at the secretive ways of Swiss banking.
The memorandum from 2004, for instance, described how UBS created hundreds of "dummy" offshore corporations where its clients could hide money from the IRS. An e-mail message sent that year captured some of the coded language used by UBS bankers. In their world, "one nut" meant $250,000, while "one swan" meant $1 million. Colors were used to designate certain currencies. Orange, for example, represented the euro; blue, the British pound. Several messages described UBS actively referring clients to outside lawyers and accountants in Switzerland and elsewhere who set up secret accounts for them.
In a brief interview Thursday, one UBS client said the bank also provided wealthy clients with electronic devices with coded computer chips that enabled them to gain access to their accounts and transfer money secretly. The passwords changed each time the accounts were accessed.
In the criminal investigation that led to this week's settlement, the U.S. Justice Department had zeroed in on about 19,000 wealthy U.S. clients. Those UBS customers had a combined $20 billion in assets at the bank, and may have evaded $300 million a year in U.S. government taxes through UBS's undeclared offshore private banking services.
But the IRS has been conducting a parallel investigation, and on Thursday the Justice Department asked a U.S. judge to require UBS to disclose to the IRS the identities and records of the 52,000 clients. In the past, UBS has suggested that the 19,000 accounts under investigation, which it is now closing, were the extent of its undeclared offshore banking services.
UBS, the world's largest private bank, said it would vigorously challenge the efforts.
As part of the settlement Wednesday, the Justice Department received the names and bank records of about 250 wealthy U.S. clients of UBS. According to people briefed on the matter, the department was preparing to indict several on charges of offshore tax evasion. A U.S. judge in Florida is expected to approve the enforcement request in three to six months, which allows UBS time to appeal and ask for extensions.
If UBS does not comply with the approved summons, it could be in default of its deferred prosecution agreement, potentially opening itself and its senior executives to indictment.
Samuel Buell, who helped to prosecute Enron and now teaches criminal and securities law at Washington University in St. Louis, said that UBS's declaration that it would fight the government's latest efforts suggested the bank was caught in a bind. U.S. government prosecutors want it to lift the veil of Swiss banking secrecy, but Swiss financial privacy laws punish the disclosure of client names.
On Thursday, the Swiss government struggled to defend that integral part of its financial system.
"Banking secrecy, ladies and gentlemen, remains intact," the Swiss president, Hans-Rudolf Merz, said at a news conference.
For the Swiss government, ceding the information might have been the only way to shield UBS, the biggest bank in the country, from crippling criminal charges. But for some in the industry, it poses the latest challenge to the core of Swiss banking traditions and opens the door to more requests not only from the United States but from other governments as well. Germany, for example, has long tried to crack down on those evading taxes through offshore accounts.
"Swiss banks and clients have always been very keen to keep their data secret, and it's one of the marketing tools," said Georg Gotschev, a lawyer at Gotschev Anwaltskanzlei in Zurich. "Right now it seems that if a country applies enough pressure, the secrecy laws are not strong enough. It's not good for the Swiss banking system."
Switzerland and its banks, which contribute about 10 percent to the economy and employ about 3 percent of the population, have often come under criticism for the secrecy laws.
The United States and Germany have been among the laws' fiercest critics. But Switzerland has rejected claims that its client confidentiality rules, a key to the success of its financial industry, attract tax evaders.
Merz pledged that Swiss banking secrecy laws would remain in place and that the laws do not "protect tax fraudsters." UBS said it "remains committed" to client confidentiality, which "was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of the bank personnel, misused the confidentiality protections."
In January, a senior UBS executive, Raoul Weil, was declared a fugitive, two months after being indicted in the United States in connection with the investigation of the bank. Weil, a Swiss citizen, oversaw the cross-border private banking operations from 2002 to 2007.
The Swiss Financial Market Supervisory Authority on Thursday criticized UBS for "seriously violating certain provisions of the Swiss Banking Act" but praised the bank for admitting to its mistakes and taking steps to rectify them.
Some lawyers said the episode was raising deeper questions about whether secrecy laws facilitated tax fraud, adding that it gave European governments ammunition to clamp down on offshore accounts.
"The significance of this for the banking industry is that this is an inroad for European countries to use the same approach vis-à-vis offshore companies," said Marnin Michaels, a partner at the Zurich office of the law firm Baker & McKenzie.
Prime Minister Gordon Brown of Britain this week pledged to go after those who avoid paying taxes in Britain by moving funds offshore and the German finance minister, Peer Steinbrück, planned to discuss the issue at a meeting with his European Union counterparts scheduled for March 4 in Brussels.
Switzerland's banking-client confidentiality laws were important to attract clients over the years. The law was enacted in 1934 but the sentiment dates to the Middle Ages and an unwritten code of confidentiality between the banker and its client.
The settlement caps a painful run for UBS. The bank sustained more than $50 billion in losses stemming from the collapse of the U.S. mortgage market and it received a $60 billion bailout from the Swiss government in October.
This month, the bank said its wealth management business, which was hurt as clients withdrew funds, showed early signs of recovery in January."
www.iht.com/articles/2009/02/20/business/20ubs.php?page=2
The info is from this link,
"The UBS memo was blunt: the "Swiss solution" could help affluent U.S. clients.
That message, sent to the bank's executives in July 2004, referred to a UBS plan to help rich customers evade taxes by hiding money in offshore havens like the Bahamas.
The memo, along with dozens of e-mail messages like it, were disclosed Thursday in a blistering court document filed by the U.S. Justice Department, which sought to compel UBS, based in Switzerland, to divulge the identities of 52,000 U.S. clients whom the authorities suspect of using secret offshore accounts at the bank to dodge taxes.
The move opened a new, unexpected front against UBS, which a day earlier had agreed to pay $780 million to settle claims that it defrauded the Internal Revenue Service, and against Switzerland's long tradition of banking secrecy.
The number of clients the authorities are seeking to identify is far higher than previously believed, raising new questions about the scale of UBS's activities and the number of U.S. clients who could be snared in the investigation. U.S. government authorities initially focused on 19,000 accounts, and UBS turned over about 250 names Wednesday. That figure now seems certain to grow.
The court document alone dealt a stinging blow to UBS, whose corps of private bankers discreetly tend the fortunes of billionaires and multimillionaires. Filed in a Miami court, the papers provide a rare inside look at the secretive ways of Swiss banking.
The memorandum from 2004, for instance, described how UBS created hundreds of "dummy" offshore corporations where its clients could hide money from the IRS. An e-mail message sent that year captured some of the coded language used by UBS bankers. In their world, "one nut" meant $250,000, while "one swan" meant $1 million. Colors were used to designate certain currencies. Orange, for example, represented the euro; blue, the British pound. Several messages described UBS actively referring clients to outside lawyers and accountants in Switzerland and elsewhere who set up secret accounts for them.
In a brief interview Thursday, one UBS client said the bank also provided wealthy clients with electronic devices with coded computer chips that enabled them to gain access to their accounts and transfer money secretly. The passwords changed each time the accounts were accessed.
In the criminal investigation that led to this week's settlement, the U.S. Justice Department had zeroed in on about 19,000 wealthy U.S. clients. Those UBS customers had a combined $20 billion in assets at the bank, and may have evaded $300 million a year in U.S. government taxes through UBS's undeclared offshore private banking services.
But the IRS has been conducting a parallel investigation, and on Thursday the Justice Department asked a U.S. judge to require UBS to disclose to the IRS the identities and records of the 52,000 clients. In the past, UBS has suggested that the 19,000 accounts under investigation, which it is now closing, were the extent of its undeclared offshore banking services.
UBS, the world's largest private bank, said it would vigorously challenge the efforts.
As part of the settlement Wednesday, the Justice Department received the names and bank records of about 250 wealthy U.S. clients of UBS. According to people briefed on the matter, the department was preparing to indict several on charges of offshore tax evasion. A U.S. judge in Florida is expected to approve the enforcement request in three to six months, which allows UBS time to appeal and ask for extensions.
If UBS does not comply with the approved summons, it could be in default of its deferred prosecution agreement, potentially opening itself and its senior executives to indictment.
Samuel Buell, who helped to prosecute Enron and now teaches criminal and securities law at Washington University in St. Louis, said that UBS's declaration that it would fight the government's latest efforts suggested the bank was caught in a bind. U.S. government prosecutors want it to lift the veil of Swiss banking secrecy, but Swiss financial privacy laws punish the disclosure of client names.
On Thursday, the Swiss government struggled to defend that integral part of its financial system.
"Banking secrecy, ladies and gentlemen, remains intact," the Swiss president, Hans-Rudolf Merz, said at a news conference.
For the Swiss government, ceding the information might have been the only way to shield UBS, the biggest bank in the country, from crippling criminal charges. But for some in the industry, it poses the latest challenge to the core of Swiss banking traditions and opens the door to more requests not only from the United States but from other governments as well. Germany, for example, has long tried to crack down on those evading taxes through offshore accounts.
"Swiss banks and clients have always been very keen to keep their data secret, and it's one of the marketing tools," said Georg Gotschev, a lawyer at Gotschev Anwaltskanzlei in Zurich. "Right now it seems that if a country applies enough pressure, the secrecy laws are not strong enough. It's not good for the Swiss banking system."
Switzerland and its banks, which contribute about 10 percent to the economy and employ about 3 percent of the population, have often come under criticism for the secrecy laws.
The United States and Germany have been among the laws' fiercest critics. But Switzerland has rejected claims that its client confidentiality rules, a key to the success of its financial industry, attract tax evaders.
Merz pledged that Swiss banking secrecy laws would remain in place and that the laws do not "protect tax fraudsters." UBS said it "remains committed" to client confidentiality, which "was never designed to protect fraudulent acts or the identity of those clients, who, with the active assistance of the bank personnel, misused the confidentiality protections."
In January, a senior UBS executive, Raoul Weil, was declared a fugitive, two months after being indicted in the United States in connection with the investigation of the bank. Weil, a Swiss citizen, oversaw the cross-border private banking operations from 2002 to 2007.
The Swiss Financial Market Supervisory Authority on Thursday criticized UBS for "seriously violating certain provisions of the Swiss Banking Act" but praised the bank for admitting to its mistakes and taking steps to rectify them.
Some lawyers said the episode was raising deeper questions about whether secrecy laws facilitated tax fraud, adding that it gave European governments ammunition to clamp down on offshore accounts.
"The significance of this for the banking industry is that this is an inroad for European countries to use the same approach vis-à-vis offshore companies," said Marnin Michaels, a partner at the Zurich office of the law firm Baker & McKenzie.
Prime Minister Gordon Brown of Britain this week pledged to go after those who avoid paying taxes in Britain by moving funds offshore and the German finance minister, Peer Steinbrück, planned to discuss the issue at a meeting with his European Union counterparts scheduled for March 4 in Brussels.
Switzerland's banking-client confidentiality laws were important to attract clients over the years. The law was enacted in 1934 but the sentiment dates to the Middle Ages and an unwritten code of confidentiality between the banker and its client.
The settlement caps a painful run for UBS. The bank sustained more than $50 billion in losses stemming from the collapse of the U.S. mortgage market and it received a $60 billion bailout from the Swiss government in October.
This month, the bank said its wealth management business, which was hurt as clients withdrew funds, showed early signs of recovery in January."