Swiss bank (UBS) to reveal customer information

[Judge Roy Bean]

ZURICH (Reuters) - Swiss officials have decided to allow UBS to hand over some client data to U.S. tax officials, weakening the country's strict bank secrecy laws in an effort to end a damaging probe into its biggest bank, a Swiss newspaper reported.

UBS is at the center of a high-profile U.S. investigation that alleges the Swiss bank helped rich Americans avoid paying taxes by hiding money away in undeclared Swiss bank accounts.

Newspaper Le Temps said in an article published on its website on Wednesday that Swiss financial regulator FINMA had decided to use a special clause -- Article 26 -- in the country's banking law to lift bank secrecy and to order UBS to hand over the data from about 250 clients to Washington.

The decision was taken after U.S. authorities threatened to withdraw UBS' banking license, the paper said quoting an unnamed source.

Berne decided last year that UBS could hand over a limited number of clients' name to the United States. UBS also admitted it had found a limited number of cases of fraud.

But the process had been slowed by an ongoing appeal procedure at a Swiss administrative court started by some UBS clients.

FINMA spokesman Alain Bichsel declined to comment on the Le Temps article. He also declined to spell out or clarify the content of Article 26.

According to a document published on FINMA's website, Article 26 deals with "protective measures" and allows the regulator to give orders to a bank.

Now the fun begins! I wonder how long it will take to leak the names.

[wondering99]

This is hilarious. Talk about being a victim of circumstance. I realize that people were breaking the law but imagine on stewing in prison on being the 1st people to get exposed from a Swiss account...after 100+ years or whatever of secrecy...talk about wrong time wrong place.

This could also have a MASSIVE fallout and I hear UBS is on life support as is. Imagine what will happen when the new understanding of using a Swiss bank is "yeah put your illegal money there...it will be kept secret...maybe."

There will be a flood of withdrawals and it could topple the bank.

[Judge Roy Bean]

I can't take credit for this one - a poster on another site quipped:

Yes, we need the names of the tax cheats.

There are still several Cabinet positions to be filled.....

[Judge Roy Bean]

http://www.marketwatch.com/news/story/u ... dist=msr_5

The IRS filed a civil lawsuit Thursday asking a U.S. district court in Miami to order UBS to disclose the identities of U.S. customers with secret Swiss bank accounts. The lawsuit claims as many as 52,000 U.S. taxpayers had these hidden accounts.

Roughly 20,000 accounts held securities, while 32,000 had cash in them. By the middle of this decade, the accounts held almost $15 billion in assets, according to the IRS.

This is going to get ugly.

[Demosthenes]

This is going to get ugly.

Yep.

Time for popcorn.

[Nikki]

It is SO hard to eat popcorn while uncontrolably drooling.

Once the customer names come in, just think of all the subpoenae and evidence to go through.

Retirement may just have to wait.

[Judge Roy Bean]

It is SO hard to eat popcorn while uncontrolably drooling.

Once the customer names come in, just think of all the subpoenae and evidence to go through.

Retirement may just have to wait.

You think it was hard then, how about after this news:

http://www.nytimes.com/2009/02/26/business/26ubs.html?

Tax Suspicions Grow on Swiss Accounts

Federal authorities suspect the scandal over Americans’ secret offshore accounts at UBS, the big Swiss bank, runs far deeper than they believed only a week ago.

While UBS admitted last week that it had failed to properly withhold American taxes on 17,000 accounts held by affluent Americans, the authorities are now investigating how the bank and its intermediaries handled taxes for an additional 35,000 accounts, according to two people briefed on the investigation.

At issue is whether UBS withheld taxes, as required by American law, and, if so, where the money went, these people said. If UBS failed to collect taxes on all 35,000 accounts, the bank could owe the Treasury Department as much as $800 million in taxes, interest, fines and penalties, according to a tax lawyer briefed on the investigation, who spoke on the condition he not be named because he is representing UBS clients.

Mark Arena, a UBS spokesman, declined to comment on Wednesday.

Federal authorities are stepping up their investigation into the Swiss bank’s activities and pressing UBS to divulge the names of tens of thousands of American clients. The effort is drawing sharp criticism from the Swiss, who say disclosing the names would violate Swiss law.

There are two main parts of the federal investigation. The first concerns the individuals who may have used UBS accounts to evade taxes. The second involves whether the bank itself properly collected tax money and forwarded it to the Treasury Department. UBS stunned the secretive world of Swiss banking last week by agreeing to pay $780 million and identify about 250 clients to settle claims that it had defrauded the Internal Revenue Service. But the I.R.S. is demanding that UBS divulge the names of 52,000 account holders as part of an investigation into individual tax evasion. The Justice Department is conducting a separate investigation.

For some accounts, UBS is required to tell third-party agents whether to withhold taxes. Federal authorities are investigating whether UBS did so or deliberately chose not to. People familiar with the matter said UBS remitted tax money on at least some of the accounts in question in recent years, although it was unclear how much.

UBS is required to withhold taxes because it is part of an I.R.S. program known as Qualified Intermediary.

Under that program, for American clients who do not sign W-9 disclosure forms, UBS generally must withhold 31 percent of interest income and 16 percent of dividend income.

For foreign clients, UBS generally must withhold at a base rate of 30 percent, but tax treaties typically reduce that rate to zero on interest and 15 percent on dividends.

The Justice Department, in court papers filed last week, accused UBS of disguising American clients as foreigners to hide their identity from the I.R.S and allow them to evade taxes, and of not properly collecting W-9 forms.

American clients are allowed to claim a tax credit for any money withheld, but those with offshore accounts intended to evade taxes generally do not do so because that would disclose their secret accounts to the I.R.S.

[Judge Roy Bean]

As a privacy advocate, I'm conflicted here. I'm having some heartburn with the idea that just because you have an account in a bank in another country you should be subjected to an assumption of wrongdoing on the part of an arguably indefatigable force dedicated to achieving a state of zero personal privacy.

Why, you might ask? Because there is going to be some selectivity here. Some are going to be dragged into the maw and some are going to be left alone. I'll leave it up to anyone's cynicism to see where those decisions are made.

[RANT]The cheerleaders of this new open season on privacy and the "evil wealthy" are also trying to prevent the average person from seeing a modern reality that might interfere with this march toward collectivism - real capital is no longer constrained by national borders. They may succeed in chasing our nation's real wealth away. And "the wealthy" can leave our economy to wither and not suffer serious consequences. Like Jack Nicholson asked, "How much better can you eat?"

It's a great leveling. It will bring down the almost-wealthy to supposedly raise the conditions for the never-have-been and never-can-be wealthy.

Thus, the assets of those who have the means will continue to head for the exits here in the US as the "new deal" seeks to tell the masses that the wealth will be tapped and redistributed for their benefit - "you'll have good health care if you need it" among the Pied Piper myths.

Anyone who thinks an account in a Swiss bank is the only facet of wealth management is falling for the "new deal" mantra that the truly wealthy are somehow going to be forced to pay just like everyone else. They're not. They aren't going to be personally impacted in any significant sense, unless of course they got lured into putting too much into deals like Madoff's.

It's the allegedly wealthy small business owners who are the targets because there's so many of them who were (and could be) successful. Like Willy Loman said, you rob banks because that's where the money is.

I recall pointing out some months ago that we're going back to the economy of the early 80's; but now I realize that unless some kind of pixie dust falls onto Washington in the coming weeks and derails the mob they're catering to, I would invite everyone to pick up that old copy of Animal Farm, READ IT and then figure out what you'll actually DO in the coming months (not just think or write about) to deal with the adjustments you'll have to make in your standard of living and what that will mean to children and grandchildren if you have them.[/RANT]

[Burzmali]

Doesn't abandoning the idea of making the rich pay their fair share reek more of "All animals are created equal, some are more equal than others" than anything the current administration is doing?

[Judge Roy Bean]

Doesn't abandoning the idea of making the rich pay their fair share reek more of "All animals are created equal, some are more equal than others" than anything the current administration is doing?

No, because the assumed "logic" behind the idea of a "fair share" is fatally flawed.

[Number Six]

The longer this mystery of which rich folks would be willing to secrete assets abroad without disclosing the fact on their tax filings will increase anxiety among "those who know who they are" and anger by the many millions struggling just to pay their bills. As the legal maneuvering in the behalf of these tax cheats fails, what will they do, will they get desperate? Pre-emptively file back years through a tax attorney?

In both "1984" and "Animal Farm" there was a useful scapegoat--in the latter "Snowball", the rebel pig, was blamed for sabotage whenever something went wrong after the animals took over. Orwell knew quite a bit about forms of government and fascism in Spain: Too bad he died before healthy political change came.

[grammarian44]

Everyone seems to be assuming that people who held assets in any of these accounts were "tax cheats." To me that's an open question.

UBS did not market these accounts to wealthy U.S. investors by saying, "These accounts are illegal, but the IRS will never find out about it." They marketed the accounts by saying, "In our more-likely-than-not opinion, income earned in these accounts will not be subject to taxation in the U.S., and what's more, you don't have to report this income to the IRS."

It was a dubious position, to say the least. But if you're not a tax professional, having a respected Swiss bank tell you these things can sound pretty persuasive. There are plenty of rich people in this country who don't know jack about international withholding regimes or about the reach of IRS jursidiction over U.S. citizens.

Once these names are disclosed, the work of figuring out what to do with these people will only just begin. Some of them may indeed be tax cheats; it depends on what they knew at the time they opened/held assets in these accounts. They will owe back taxes, civil penalties, and interest. Whether they deserve to be in jail is a very different matter.

As for the idea that disclosures like this will invite the rich to move overseas: If it were that easy for a U.S. citizen to escape U.S. income tax, wouldn't the entire population of Vero Beach already have relocated to the Cayman Islands?

[Burzmali]

Doesn't abandoning the idea of making the rich pay their fair share reek more of "All animals are created equal, some are more equal than others" than anything the current administration is doing?

No, because the assumed "logic" behind the idea of a "fair share" is fatally flawed.

So the rich get to break the law, but it's okay because the law is unfair to begin with?

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Well as long as they meant no harm The rich are by-and-large very greedy, that's how one becomes rich in the first place, and it's a trait that is easily passed on to children. I'm going to guess, but I bet if the banks had told them that their money would be used to fuel genocide in 3rd world nations, and they made 5% tax free, most still would have opened accounts.

[Judge Roy Bean]

....
Well as long as they meant no harm The rich are by-and-large very greedy, that's how one becomes rich in the first place....

Bovine scatology. You are either really confused or purposefully ignorant, or both.

[grammarian44]

Well as long as they meant no harm The rich are by-and-large very greedy, that's how one becomes rich in the first place, and it's a trait that is easily passed on to children. I'm going to guess, but I bet if the banks had told them that their money would be used to fuel genocide in 3rd world nations, and they made 5% tax free, most still would have opened accounts.

You're just using a stereotype of rich people to create the impression that they "must" be guilty of cheating. That's really no different from saying, "See the towel on that guy's head? He must be a terrorist." Thankfully, that's not the standard that will be used in court.

[Burzmali]

....
Well as long as they meant no harm The rich are by-and-large very greedy, that's how one becomes rich in the first place....

Bovine scatology. You are either really confused or purposefully ignorant, or both.

Really? Good thing you dodged responding to the comment directed at you, I'd hate to have a straightforward conversation.

[Burzmali]

Well as long as they meant no harm The rich are by-and-large very greedy, that's how one becomes rich in the first place, and it's a trait that is easily passed on to children. I'm going to guess, but I bet if the banks had told them that their money would be used to fuel genocide in 3rd world nations, and they made 5% tax free, most still would have opened accounts.

You're just using a stereotype of rich people to create the impression that they "must" be guilty of cheating. That's really no different from saying, "See the towel on that guy's head? He must be a terrorist." Thankfully, that's not the standard that will be used in court.

Stereotypes come from somewhere, and searching for bank accounts that are highly correlated to tax evasion is like commenting that that nice man with the towel on his head and 8 sticks of dynamite strapped to his chest might be a terrorist.

[jg]

...UBS did not market these accounts to wealthy U.S. investors by saying, "These accounts are illegal, but the IRS will never find out about it." They marketed the accounts by saying, "In our more-likely-than-not opinion, income earned in these accounts will not be subject to taxation in the U.S., and what's more, you don't have to report this income to the IRS."

It was a dubious position, to say the least. But if you're not a tax professional, having a respected Swiss bank tell you these things can sound pretty persuasive. There are plenty of rich people in this country who don't know jack about international withholding regimes or about the reach of IRS jursidiction over U.S. citizens.
...

If you have access to any such statements it would seem entertaining to read (in much the same way that tax denier nonsense is entertaining to me).
Was that really the essence of what was in their marketing material?

[grammarian44]

...UBS did not market these accounts to wealthy U.S. investors by saying, "These accounts are illegal, but the IRS will never find out about it." They marketed the accounts by saying, "In our more-likely-than-not opinion, income earned in these accounts will not be subject to taxation in the U.S., and what's more, you don't have to report this income to the IRS."

It was a dubious position, to say the least. But if you're not a tax professional, having a respected Swiss bank tell you these things can sound pretty persuasive. There are plenty of rich people in this country who don't know jack about international withholding regimes or about the reach of IRS jursidiction over U.S. citizens.
...

If you have access to any such statements it would seem entertaining to read (in much the same way that tax denier nonsense is entertaining to me).
Was that really the essence of what was in their marketing material?

I do have such access. But no, I'm not going to post them. It's a matter of public knowledge in the tax bar, however, that UBS marketed its accounts to investors by claiming that there was no need to disclose them and that the income was more likely than not not subject to US tax.

[grammarian44]

It would be interesting to know if that was just marketing fluff, or if it was vetted by their in house attorneys and Compliance Department. Or were the Marketing people going off the reservation.

It was marketing fluff that was also thoroughly vetted by compliance.

The mentality of Swiss bankers works generally like this:

"We want foreigners to place their deposits with us. What makes our little neck of the woods attractive to foreign investors is that our government is very private--so private, in fact, that it doesn't like to cooperate with the tax divisions of foreign countries (even though the Swiss have entered into dozens of tax treaties with foreign countires in which they promise to share information of various kinds).

"Therefore, our best way to attact investors is to market our accounts this way: 'Invest with us! We don't ask questions! What's more, we do not expect the tax authorities of other nations to ask questions, either!'"

The compliance department looks over the marketing and says, "Well, we're not LYING. We honestly don't expect that these accounts will end up getting anyone in trouble. We're not saying this necessarily because we think we'll get away with illegal activity. We're just saying we don't expect anyone to get in trouble, regardless of the reason they don't get in trouble."

So they market the accounts, stating in general, "We at UBS think it is more likely than not that your account will not be subjected to tax in [name non-Swiss country here]."

They don't say, "If you're looking to squirrel away drug money, this is the place!" They also don't say, "The IRS will NEVER be able to get a hold of your name, so if you're looking to cheat them, this is the place!" They just say, "We do not expect these accounts to be taxable in the U.S."

So these accounts are favored by drug cartels and tax fraudsters, even though they are not directly marketed that way.

But it still doesn't follow that everyone with an account like this is a criminal. Lots and lots of people with these accounts inherited them, having no idea that they were illegal in any way. These people are scrambling right now to make voluntary disclosure to the IRS to avoid criminal liability. And well they should: if they inherited a foreign account and had no idea it was illegal, they aren't criminals--they still owe back taxes and maybe civil penalties and interest, but they aren't criminals.