52,000 US clients hid UBS accounts, lawsuit claims

AS MANY as 52,000 US customers hid UBS accounts from the government in violation of tax laws, a government lawsuit against the Swiss bank alleged yesterday.

The US Department of Justice filed a suit seeking to force UBS to disclose the holders of accounts with about $14.8 billion in assets. It alleged UBS, Switzerland’s biggest bank, engaged in cross-border securities transactions in the US that it knew violated security laws and helped US taxpayers set up dummy offshore companies. UBS said it would challenge enforcement of the complaint.

The complaint came a day after UBS agreed pay $780 million in fines and turn over about 250 names to the US as part of a settlement of two other US government lawsuits in which it admitted having enabled clients to evade taxes.

The settlement provoked intensive questioning over the future of Switzerland’s secretive banking industry as international pressure mounts for more transparency.

Hans-Rudolf Merz, the country’s president, said the UBS settlement would not compromise the confidentiality of Swiss banking.

“Banking secrecy remains intact,” Mr Merz, who is also Switzerland’s finance minister, told a press conference in Bern. He noted that banking secrecy “does not protect tax fraud” and can be lifted if clients are suspected of a crime that counts as a crime in Switzerland as well as abroad.

The Swiss system is dealing with a double blow of a threat to secrecy and the multibillion franc credit writedowns that caused losses at its biggest banks and a state bailout for UBS.

“The Swiss financial centre is on its knees,” said Karel Lannoo,chief executive of the Centre for European Policy Studies.

Critics said the distinction between tax fraud, which is a crime under Swiss law, and tax evasion, which is not, can be difficult to make. Mr Merz said it was “very clear” that the 250–300 dossiers involved in the settlement involved tax fraud. Some of the cases had been examined by his ministry, he added.

It seems the Swiss government bowed to US pressure and in effect told UBS to settle rather than risk an indictment that would damage the bank and Switzerland’s financial role and economy.