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Swiss bank UBS refuses US request for client names

Switzerland's UBS bank has refused a US government request to reveal the names of some 52,000 US nationals with Swiss bank accounts. UBS earlier agreed to pay US authorities $780 million to settle a tax fraud case.

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Swiss banking giant UBS Thursday refused a US government demand to provide information on 52,000 US clients, requested in a lawsuit filed earlier in the day as part of a tax fraud investigation.

The US government filed a lawsuit in a Miami, Florida asking the court to order UBS to reveal to the US tax authorities the identities of the bank's US customers -- identified with the moniker "John Doe" -- "with secret Swiss accounts," the Justice Department said.

"UBS believes it has substantial defenses to the enforcement of the John Doe summons and intends to vigorously contest the enforcement of the summons in the civil proceeding," the Swiss bank said, citing a deal reached Wednesday with the Justice Department to cooperate in the tax probe.

 

'Secrecy remains intact'

 

UBS earlier agreed to pay US authorities 780 million dollars to settle a tax fraud case that threatened the very existence of Switzerland's biggest bank and shook its banking secrecy.

 

The settlement shocked Switzerland's establishment on Thursday after the Swiss regulator said that the case had not only jeopardised UBS but also the country's fabled financial stability.

The Swiss Financial Markets Supervisory Authority (FINMA) ordered Switzerland's banking flagship to reveal to US authorities account details for about 250 to 300 customers targeted by the investigation, according to Swiss President and Finance Minister Hans-Rudolf Merz.

"Banking secrecy remains intact" Merz told journalists, adding that it "doesn't protect tax fraudsters."

However, the decision to hand over client details sparked a debate on the future of banking secrecy in Switzerland, which is also under pressure from its European neighbours, notably Germany, over claims that it encourages tax evasion.

European Commission spokeswoman Maria Assimakopoulou said in Brussels that the EU had already suggested that secrecy should be lifted in cross border requests for assistance.

"We hope that if Switzerland were confronted with a similar request to this one from a member state, it would be treated in the same way," she added.

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

Dominant centre-right parties in Switzerland defended the secrecy law, but the Socialists and Greens called for changes and more cooperation with other countries.

The Neue Zurcher Zeitung newspaper described the UBS settlement as a "capitulation" to US pressure and said the Swiss financial services industry "had its back to the wall."

US court documents revealed shell accounts, which UBS used to justify evading its reporting obligations and help US taxpayers to continue concealing their identities and assets from the Internal Revenue Service.

In return for the bank's agreement "to pay 780 million dollars in fines, penalties, interest and restitution" and its continued cooperation, the US government would recommend dismissal of the charges, the US Justice Department said in a statement late Wednesday.

It called the move to provide account information "unprecedented."

UBS is bound by legal requirements on its US business as well as by taxation agreements between the United States and Switzerland that cover tax fraud and oblige the bank to withhold income taxes on some US clients with foreign securities.

UBS chairman Peter Kurer said the bank "sincerely regrets the compliance failures in its US cross-border business."

"We accept full responsibility for these improper activities," he added.

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

But the official Swiss financial watchdog on Thursday revealed even deeper implications of the criminal charges first brought by a Florida court against a former UBS banker last spring.

"Such charges could have had drastic consequences for UBS and its liquidity situation and ultimately put its existence at risk," as well as for "the stability of the Swiss financial system," FINMA said in a statement after it reprimanded the bank.

UBS has been struggling to recover from an annual loss of 17 billion dollars in 2008 and took on a state aid package after it was battered by the financial crisis and credit squeeze.

The bank's stock closed 4.8 percent up at 12.8 francs.

 

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