UBS closes Swiss accounts of US clients
Tom Bawden in New York
UBS caved in to mounting pressure from the US Government yesterday and announced plans to close the Swiss bank accounts of all its American customers and prepared to lift the veil of secrecy that has protected its clients for centuries.
Mark Branson, the chief financial officer of UBS's global wealth-management unit, told a Senate hearing into tax evasion in Washington: “We have decided entirely to exit the business. UBS will no longer provide offshore banking or securities services to US residents through our bank branches.”
Mr Branson said: “While we are winding down this business there will be no new accounts opened and Swiss-based client advisers will not be permitted to travel to the United States for the purpose of meeting with US clients.”
Closing Swiss accounts to US clients does not affect UBS's general wealth-management business in America, Mr Branson said. UBS, the world's largest wealth-management group, will still offer US-based services through three subsidiaries.
The US Government and the Internal Revenue Service (IRS) have been turning the screw on banks suspected of helping clients to evade tax through undeclared offshore accounts.
They have been pressing UBS to give details of 19,000 US clients with $17.9 billion (£8.9 billion) in undeclared Swiss bank accounts.
An investigation, whose report was issued yesterday, found that only 1,000 of UBS's 20,000 American clients with Swiss bank accounts had declared their accounts to the IRS.
UBS will not hand over identities of all 19,000 of these customers because, sources say, it does not follow that every undeclared account has broken US tax law. Instead it will identify only those it believes may have engaged in tax fraud, although that number is expected to run into thousands.
Yesterday's developments amount to a double whammy of bad news for UBS. Although UBS offered to relocate its offshore banking customers to subsidiary UBS entities, registered by the US Securities and Exchange Commission, analysts did not expect many clients to switch, cutting off significant income.
Furthermore, the guarantee of anonymity was a big draw for many rich UBS clients and its loss will dent confidence in the bank.
Two weeks ago a US court authorised the IRS to demand names of US accountholders from UBS as part of an attack on tax evasion, estimated to cost America $100 billion a year in unpaid tax. UBS, in response, hinted that releasing names could break Swiss law requiring bank confidentiality.
However, Mr Branson indicated yesterday that Swiss law would not be relevant to many of its US offshore clients and that UBS would hand over an undisclosed number of their names.
He said: “We are working with the US Government to identify the names of US clients who may have engaged in tax fraud. Client identity is generally protected from disclosure under Swiss law. But such privacy protections do not apply when disclosure of client names is requested in connection with an investigation of tax fraud and where the requests are presented to the Swiss Government.”
Tom Bawden in New York
UBS caved in to mounting pressure from the US Government yesterday and announced plans to close the Swiss bank accounts of all its American customers and prepared to lift the veil of secrecy that has protected its clients for centuries.
Mark Branson, the chief financial officer of UBS's global wealth-management unit, told a Senate hearing into tax evasion in Washington: “We have decided entirely to exit the business. UBS will no longer provide offshore banking or securities services to US residents through our bank branches.”
Mr Branson said: “While we are winding down this business there will be no new accounts opened and Swiss-based client advisers will not be permitted to travel to the United States for the purpose of meeting with US clients.”
Closing Swiss accounts to US clients does not affect UBS's general wealth-management business in America, Mr Branson said. UBS, the world's largest wealth-management group, will still offer US-based services through three subsidiaries.
The US Government and the Internal Revenue Service (IRS) have been turning the screw on banks suspected of helping clients to evade tax through undeclared offshore accounts.
They have been pressing UBS to give details of 19,000 US clients with $17.9 billion (£8.9 billion) in undeclared Swiss bank accounts.
An investigation, whose report was issued yesterday, found that only 1,000 of UBS's 20,000 American clients with Swiss bank accounts had declared their accounts to the IRS.
UBS will not hand over identities of all 19,000 of these customers because, sources say, it does not follow that every undeclared account has broken US tax law. Instead it will identify only those it believes may have engaged in tax fraud, although that number is expected to run into thousands.
Yesterday's developments amount to a double whammy of bad news for UBS. Although UBS offered to relocate its offshore banking customers to subsidiary UBS entities, registered by the US Securities and Exchange Commission, analysts did not expect many clients to switch, cutting off significant income.
Furthermore, the guarantee of anonymity was a big draw for many rich UBS clients and its loss will dent confidence in the bank.
Two weeks ago a US court authorised the IRS to demand names of US accountholders from UBS as part of an attack on tax evasion, estimated to cost America $100 billion a year in unpaid tax. UBS, in response, hinted that releasing names could break Swiss law requiring bank confidentiality.
However, Mr Branson indicated yesterday that Swiss law would not be relevant to many of its US offshore clients and that UBS would hand over an undisclosed number of their names.
He said: “We are working with the US Government to identify the names of US clients who may have engaged in tax fraud. Client identity is generally protected from disclosure under Swiss law. But such privacy protections do not apply when disclosure of client names is requested in connection with an investigation of tax fraud and where the requests are presented to the Swiss Government.”
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