CovOps
 Location : Ether-Sphere
Job/hobbies : Irrationality Exterminator
Humor : Über Serious
 |  Subject: Malevolent, Thieving U.S. Statists Attempt To Destroy Swiss Banking Secrets  Sat Nov 15, 2008 6:22 am | |
| It is a world of encrypted laptops,
unmarked mail and the briefest stops in multiple hotels. Accusations by
US prosecutors this week shed a fascinating light on the allegedly
cloak-and-dagger world of UBS, Switzerland's biggest bank. A
grand jury in Florida has charged one of UBS's top executives, Raoul
Weil, with helping 17,000 Americans to avoid tax by safeguarding their
money in secret Swiss bank accounts.Weil,
who is based in Zurich, is the head of UBS's wealth management
division, and his prosecution is likely to cause deep alarm at the
highest levels of Switzerland's banking establishment."There's
enough in this indictment, if you read between the lines, to suggest
that UBS has a serious problem here," says Bradley Simon, a former
federal prosecutor at law firm Simon & Partners. "They're making some really serious allegations that go to the heart of UBS."The
US department of justice has been gunning for UBS for many months. It
alleges that the bank aggressively pushed its services to US citizens
through none-too-subtle nudges about tax-avoidance benefits.Between 2002 and 2007, some 20,000 American clients had private accounts at UBS with a hefty $20bn in total assets. Florida's
federal prosecutor, Alexander Acosta, who is leading the charge against
UBS, says 17,000 of these clients concealed their accounts from the
Internal Revenue Service.Secret off-shore bank accounts are nothing new. But what appears to have enraged the US authorities are UBS's tactics.According
to the indictment, UBS at one stage had customers signing a form which
said: "I would like to avoid disclosure of my identity to the US IRS."Letters
to clients assured them that since 1939, the bank had been successful
in concealing the identity of account holders from the US authorities.
There was even a training course for staff in September 2006 on how to
conduct business discreetly – by using mail without UBS insignia, by
using encrypted computers and "by changing hotels while travelling". It
all sounds a bit James Bond – and it gets worse. A former UBS staffer,
Bradley Birkenfeld, who is cooperating with the authorities, claims he
once used a toothpaste tube to smuggle diamonds across an international
border for a bank client.The
charges against Weil carry a potential sentence of five years in prison
and a $250,000 fine, so the 49-year-old is unlikely to be keen to hop
on a transatlantic flight from Zurich. But if the bank ignores the
indictment, UBS could face severe consequences – perhaps an indictment
against the institution or a threat to its US banking licence."The
justice department will be putting enormous pressure on UBS and
possibly threatening an indictment against the bank," says Simon, who
believes such a move could be shattering for the reputation of a large
financial institution."Remember Arthur Andersen? When they were indicted, it spelt the end for them."Switzerland
rarely allows its citizens to be extradited to face charges abroad –
and its national laws require banks to respect clients' privacy
strictly. But there is a loophole: if there is evidence of criminal
activity, Swiss banks can provide information to cooperate with law
enforcement authorities.UBS
provided a bland statement saying Weil was relinquishing his duties
until the matter was resolved. It added: "UBS is fully committed to
continuing its efforts to cooperate with the investigation of its US
cross-border business in a responsible manner with all relevant
authorities towards a satisfactory resolution of this matter."The
drama is the last thing UBS needs. In common with rival banks across
Europe and the US, it has been scorched by the global financial crisis,
writing off more than $40bn of losses on toxic assets. Its longstanding
chairman, Marcel Ospel, quit in April, admitting to "mistakes" amid
shareholder unrest.America's
assault on Switzerland's banking secrecy is causing ructions in Zurich.
A report in one paper, the Tages-Anzeiger, this week accused the US
treasury of covertly tracking transactions between 100 Swiss
institutions through international computer systems used for
transaction clearance. The paper named a system called Remotegate and
claimed that the Americans were using tools designed to tackle
international terrorism.The
Swiss government is being tight-lipped. A spokesman at Switzerland's
embassy in Washington would only say: "The embassy was informed by the
department of justice of the charges brought against Mr Weil."The
US authorities want the names of UBS's 17,000 wealthy American clients.
If it hands them over, the Swiss bank will set a highly significant
precedent not only for its rivals in Switzerland but for banks in tax
havens around the world which operate in the US.If
all 17,000 customers are forced to stump up tax, it could be a decent
earner for the US treasury. Perhaps the money could even end up back in
the banking system, helping to fund Henry Paulson's $700bn bail-out of
America's own teetering financial institutions.
http://www.guardian.co.uk/business/2008/nov/14/ubs-switzerland |
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