Switzerland’s tax authorities, , are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department

Switzerland’s tax authorities, under pressure from a growing United States investigation into the Swiss bank giant UBS, are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department, two people briefed on the matter said Tuesday. The move would represent a significant shift in Switzerland’s banking secrecy laws, whose tradition dates to the Middle Ages. <br />UBS began handing over data on hundreds of American clients with offshore private banking accounts to the Swiss taxing authority starting in August, these people said. The delivery to the Justice Department, expected to take place within several months, would place American client names in the hands of federal prosecutors seeking to build criminal cases against wealthy Americans they suspect of tax evasion. UBS, the world’s largest private bank, is under a widening federal investigation into whether it helped up to 20,000 wealthy American clients illegally evade taxes by stashing $20 billion in overseas accounts that were not declared to the Internal Revenue Service. UBS declined to comment, saying only that it is cooperating with the investigation. In July, a federal judge in Miami approved a Justice Department request seeking to force UBS to turn over certain client names. The summons is thought to be the first to a foreign bank.Swiss law makes disclosure of client data or names a crime unless the Swiss authorities think that the client has committed a serious crime, like money laundering or tax fraud. Unlike in the United States, Switzerland does not consider tax evasion to be a crime, though both countries have largely similar definitions of tax fraud.Under pressure in recent months from the Justice Department, Switzerland’s justice ministry, taxing authority and banking regulator have adopted the view that some American clients of UBS may have committed tax fraud.Justice Department officials hope to prove that the American clients committed fraud and engaged in tax evasion by concealing their ownership of offshore assets, in part by creating sham entities and then filing I.R.S. forms that falsely claimed the entities were the owners of the accounts.United States law requires American taxpayers, including trusts and partnerships, to report all financial accounts held in a foreign country if their total value exceeds $10,000 during the year. Not doing so can result in a penalty of up to 50 percent of the amount in the account at the time. In a new tactic, the Justice Department is focusing on failure by UBS’s American clients to file those reports.The investigation is being aided by a former top UBS private banker, Bradley C. Birkenfeld, who pleaded guilty in June to helping a client, Igor Olenicoff, a property developer, conceal about $200 million in offshore accounts that were undeclared to the I.R.S. Both men, who are United States citizens, are cooperating with the investigation. As part of the inquiry, the I.R.S.’s criminal division is scrutinizing 12 wealthy American clients of UBS and of LGT, a private bank in Liechtenstein, and is likely to send some of those cases to the Justice Department for prosecution, according to two people briefed on the matter. In addition, about 100 clients of LGT, and of UBS are under active investigation by the I.R.S.’s civil division, but their names have not been referred to the criminal unit for further scrutiny. The I.R.S. and the Justice Department declined to comment on Tuesday.<br />The 100 client names and data came from a former LGT employee, Heinrich Kieber, who in 2002 stole company data on 1,400 worldwide clients and later turned it over to the I.R.S. and other countries. UBS gave the client records to the Swiss taxing authority after being urged to do so by the Swiss banking industry regulator known as the EBK. The Swiss “are taking the view that the client, not UBS, is mostly to blame,” one of the people briefed on the matter said.The data includes account names, assets, contact information, records of foreign entities incorporated for the purposes of hiding assets and client authorizations of trades. Under Swiss law, the Swiss taxing authority is required to inform UBS clients of any disclosures. American clients can appeal to the Swiss tax authority not to turn over the data to the Justice Department, a process that can take weeks or even months.

Switzerland’s tax authorities, , are expected to hand over confidential data on wealthy American clients of UBS to the Justice Department

Switzerland’s tax authorities, under pressure from a growing United States investigation into the Swiss bank giant UBS, are expected to hand...

Read more »