Busted: Bankers and The Global Economy

July 19, 2008

Swiss Secret Banking Dropped by UBS

Due to secrecy pressures from the U.S. federal government, Swiss-owned UBS has decided to drop offshore banking services in America because of criticism that the foreign bank assists Americans in rampant tax evasion. It is now much harder for Americans to participate in secret banking.

Meanwhile, the bank is cooperating with the U.S. government to identify U.S. clients who might have committed tax fraud by using UBS services. Because of the refusal of the Swiss to succumb to privacy pressures, UBS has elected to cease their offshore banking service altogether for America.

Client identity is usually protected under Swiss law, but not when a foreign government makes a formal request for information in a tax fraud investigation. U.S. Senators believe that UBS has assisted wealthy Americans to evade taxes, costing the country an estimated 100 billion in lost income. UBS has played down the significance or importance of offshore private business as a very small part of their services.

UBS has admitted no guilt themselves, but has decided that certain employees violated U.S. law by engaging in some of the conduct that a behind-the-scenes U.S. government internal investigation uncovered, such as assisting in the creation of sham offshore companies to defraud tax authorities. A hefty fine as high $500 million may be in the works after an investigation of the fraud is complete. In the meantime, UBS is transferring many of their clients for wealth management through Paine Webber. Because of cooperation by UBS, the bank is not expected to lose its banking license in America.

The public stance is that setting up offshore companies is ceasing in order to stop a repeat of the offense. The reality is that Swiss banking is obsessed with secrecy and believe that they must provide that secrecy in good faith to their clients. Paine Webber requires proper disclosure by clients as dictated by the SEC and other government entities.

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