Current News


UBS Stops Offshore Banking for U.S. Clients

Published: July 18, 2008

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

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.



The Power Hour:
(7-10am CST)
···Listen Live

Listen FREE thru Global Star Satellite Feed






All logos and trademarks in this site are property of their respective owner.
FAIR USE NOTICE: This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. For more information go to:

Copyright © 2007. The Power Hour. All rights reserved.