UBS admits to US tax fraud, agrees to $780 million in fines

Swiss bank UBS has admitted to defrauding the US Internal Revenue Service and has agreed to pay 780 million dollars in fines to the US government.


AFP - Swiss banking giant UBS has admitted US tax fraud and agreed to pay 780 million dollars to the US government, cooperate in an ongoing probe and name scofflaw clients, the Justice Department said Wednesday.

"UBS AG, Switzerland's largest bank, has entered into a deferred prosecution agreement on charges of conspiring to defraud the United States by impeding the Internal Revenue Service (IRS)," the Justice Department said in a statement.

"As part of the deferred prosecution agreement and in an unprecedented move, UBS, based on an order by the Swiss Financial Markets Supervisory Authority (FINMA), has agreed to immediately provide the United States government with the identities of, and account information for, certain United States customers of UBS's cross-border business," it said.

The Swiss bank also agreed to "expeditiously" exit the business of providing banking services to United States clients with undeclared accounts, the department said.

UBS's agreement "to pay 780 million dollars in fines, penalties, interest and restitution" was accepted earlier Wednesday by a US federal judge in Florida.

"In light of the bank's willingness to acknowledge responsibility for its actions and omissions, its cooperation and remedial actions to date, and its promised continuing cooperation and remedial actions, the government will recommend dismissal of the charge, provided the bank fully carries out its obligations under the agreement," the Justice Department said.

Under Swiss banking secrecy law, banks in Switzerland are prohibited from divulging any information to authorities or any third parties about their clients, except in cases involving recognized criminal investigations.

Switzerland and UBS have been under pressure from the United States since the tax fraud case first emerged in a Florida court last year.

UBS announced in July that it was halting its offshore banking services for US citizens in light of the probe.

The Justice Department said Wednesday US court documents showed that UBS in 2000, after it purchased the US brokerage firm Paine Webber, had voluntarily entered into an agreement with the IRS that required the bank to report to the tax agency income and other identifying information for its US clients who held US securities in a UBS account.

Court documents allege that the agreement also required UBS to withhold income taxes from United States clients who directed investment activities in foreign securities from the United States.

The documents state that, "in order to evade those new reporting requirements, employees and managers within the cross-border business, with the knowledge of certain UBS executives, helped United States taxpayers open new UBS accounts in the names of nominees and/or sham entities."

According to court documents, the assets of the individual’s accounts were then transferred to the newly created shell accounts, which UBS used to justify evading its reporting obligations and help US taxpayers to continue to conceal their identities and assets from the IRS.

The documents describe a sophisticated web of marketing Swiss bank secrecy to US clients. In 2004 alone, Swiss bankers allegedly traveled to the United States approximately 3,800 times to discuss their clients’ Swiss bank accounts.

In November 2008, UBS executive Raoul Weil was indicted by a federal grand jury in Fort Lauderdale, Florida, and charged with conspiring to defraud the US for his alleged role in overseeing the United States cross-border business.

The district court recently declared him to be a fugitive, the Justice Department said.

In June 2008, former UBS private banker Bradley Birkenfeld pleaded guilty to a charge of conspiring to defraud the US for similar conduct. He is scheduled to be sentenced on May 1.

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