Posted by 9jabook.com on September 3, 2009 at 11:38pm
About a dozen wealthy Nigerians are on a list the usually secretive Switzerland government has handed over to American authorities in a tax dispute settlement that has broken the countrys banking secrecy and now threatens to spill over to other banks.
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The deal promised to end years of investigation and uncertainty for the bank, UBS, which announced that the government was exiting the stake it had taken to aid the bank during the financial crisis.
The Swiss have also agreed to process requests by the United States seeking information from banks besides UBS about account holders suspected of evading U.S. taxes.
Sources said the Nigerian clients of UBS are already initiating legal moves to keep their identity secret.
“This announcement should send a signal, no matter what institution you’re with, the Internal Revenue Service (IRS) is willing to pursue both the institution and the individual,” I.R.S Commissioner Doug Shulman said, adding that the accounts were at one time worth $18 billion.
He said U.S. authorities would not name any other foreign banks being probed, but the IRS is expected to use the Swiss deal as a template to pursue further prosecutions.
“The IRS is now gaining institutional skill and knowledge in how to pursue these types of cases and they’re going to use that. This is, I believe, the beginning and not the end,” said Peter Hardy, a former federal prosecutor and specialist in white-collar crime at Post & Schell in Philadelphia. The UBS dispute had strained relations between the United States and Switzerland and challenged the latter’s jealously guarded bank secrecy laws.
The deal may add steam to a global effort among cash-strapped governments to crack down on tax-evading jurisdictions.
But the settlement could help UBS, the world’s second-largest wealth manager, restore an image that has been battered by the financial crisis.
UBS said the Swiss government was exiting its 6 billion Swiss franc ($5.6 billion) stake, with the shares to be placed with institutional investors.
UBS Chairman Kaspar Villiger said the tax agreement helps resolve one of UBS’ most pressing issues. “I am confident that the agreement will allow the bank to continue moving forward to rebuild its reputation through solid performance and client service.” he said.
In February, UBS agreed to pay $780 million and disclose about 250 client names to settle a criminal probe by U.S. authorities.
One former UBS banker testified that he smuggled a client’s diamonds into the United States in a tube of toothpaste. The deal effectively ends a separate civil lawsuit by U.S. authorities that sought up to 52,000 account names. There was no further monetary penalty. “It’s good to get this out of the way but the confidence of a lot of clients has been compromised so I’m not sure we will see inflows return.
It will take time to recover reputation from this,” said Jaap Meijer, an analyst at Evolution Securities in London. Switzerland may claim its banking secrecy remains intact, but some private bankers said it is no longer a selling point for its banks, which will need to offer other skills like wealth management and legacy planning to attract clients. “The majority of assets in Swiss private banks are from European Union citizens,” said David Williams, an analyst at Fox-Pitt Kelton in London.
“I think it won’t be long before we see action from the European Union along similar lines,” he said. The revised treaty between the United States and Switzerland would allow action in the case of “tax fraud and the like” in the UBS case, the Swiss government said. Officials said precise details would be published 90 days after the agreement comes into force.
The U.S. government retains the right to go back and use a summons to collect the names, which roughly equal the number of accounts, if the settlement process fails, said Shulman.
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