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UBS Stops Offshore
Banking for U.S. Clients
By BERNIE BECKER and JULIA WERDIGIER
Published: July 18, 2008
http://www.nytimes.com/2008/07/18/business/worldbusiness/
WASHINGTON — Faced with a federal
investigation into its private banking
practices, the Swiss bank giant, UBS,
said on Thursday that it would stop
offering
offshore-banking services to clients in
the United States.
“We have decided to exit entirely the
business in question,” Mark Branson,
chief financial officer of UBS’s global
wealth-management unit, said in his
opening statement before a Senate
subcommittee.
In his testimony, Mr. Branson apologized
for any compliance failures that may
have happened and said the decision to
close its Switzerland-based cross-border
business was intended to ensure that
such failures did not happen again.
Clients in the United States will
continue to be able to access UBS’s
services through wealth management units
that are regulated by the Securities and
Exchange Commission, he said. But
advisers based in Switzerland will not
be allowed to come to the United States
to meet with American clients.
UBS’s decision came as a surprise even
to Senator Carl Levin, the Michigan
Democrat and subcommittee chairman, who
said in his opening statement that UBS
operated “behind a wall of secrecy” that
needed to be torn down.
“I thought we were prepared for any
possibility,” Mr. Levin said after the
hearing. “It turns out we weren’t.”
The report by Mr. Levin’s subcommittee
said that UBS and LGT, a bank owned by
the royal family of Liechtenstein,
helped Americans avoid taxes by setting
up
convoluted foreign-owned offshore
accounts whose assets did not have to be
reported to the Internal Revenue
Service.
Federal prosecutors say that UBS, the
world’s largest private bank, helped
American clients hide $20 billion
overseas in secret offshore accounts,
evading
$300 million or more in taxes. The
Internal Revenue Service and federal
prosecutors ordered UBS earlier this
month to hand over the names of a number
of
wealthy American clients.
The investigation initially focused on
Bradley Birkenfeld, an American who is a
top UBS executive in the private banking
sector, and who pleaded guilty in
June on a single fraud charge. But the
investigation has since widened and now
focuses on UBS’s services offered to
clients in the United States from
Switzerland.
Mr. Branson said on Thursday that UBS
was working with the federal government
to identify the names of American
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,” Mr. Branson
said.
The investigation has caused some
concern among UBS’s employees in the
United States, who are “understandably
alarmed by the reports of misconduct
that they
have seen,” Mr. Branson said.
UBS started an investigation into
practices of its cross-border business
last year and even though the bank had
detailed written policies prohibiting
employees from engaging in misconduct,
like assisting in the creation of sham
offshore companies to defraud tax
authorities, Mr. Branson admitted that
controls and supervision were
“inadequate.”
Some analysts said UBS needed to be
cautious to protect the reputation of
its wealth management business —
considered the crown jewel of the
company —
especially after write-downs on assets
in its investment banking unit prompted
the Swiss bank to report a loss in the
first quarter.
Bernie Becker reported from Washington
and Julia Werdigier from London. |
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