UBS: 'Protect the Banking Secrecy'
A standoff between U.S. congressional leaders and Swiss bankers comes to a head today as a senior executive at UBS, which is in hot water over allegations that it helped some U.S. investors avoid paying income taxes, testifies on Capitol Hill.
The last time Mark Branson, chief financial officer of Swiss-based UBS's global wealth management and Swiss bank division, testified before the Senate panel, he "apologized and announced the bank would stop offering cross-border private banking through its unregulated units to U.S.-domiciled customers," according to Reuters. Branson also said the bank was working with U.S. officials to identify clients who may have engaged in fraudulent activities.
Last month, UBS agreed to surrender the identities of up to 300 clients as part of a $780 million fraud settlement, invoking the country's unusually-stringent secrecy law to deny giving up the other names.
The Justice Department then filed a lawsuit alleging that as many as 52,000 wealthy Americans used secret accounts with UBS to avoid paying income taxes back home (an earlier Senate estimate put the number of questionable accounts at 19,000).
Also at issue during today's hearing is a 2000 memo to UBS from Chicago-based law firm Baker & McKenzie that discussed ways the bank could keep American clients without violating federal laws that require investments to be disclosed for income taxes. The law firm reportedly warned UBS against advising its clients to place investments under specially created offshore companies, according to USA Today.
"This could be viewed as actively helping our clients to evade U.S. tax, which is a U.S. criminal offense," the memo stated. "What we can do is suggest that clients seek external professional advice and offer them a choice of approved service providers if they request it."
During his opening remarks, Sen. Carl Levin (D-Mich.) called the Swiss banking policy a "cynical charade" and cited UBS figures saying that in 2004, 32 different client advisers had traveled to the United States, seeing 3,800 clients per year on average. Levin called it a "stunning fact" and also quoted an internal UBS document from 2006, entitled "U.S. International Trading," that laid out its policy regarding foreign intervention by agencies such as the IRS: "Protect the banking secrecy."
See C-SPAN for a live stream of today's UBS hearing.
By Derek Kravitz |
March 4, 2009; 4:08 PM ET
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