An ignominious defeat for UBS in its row with the US tax authorities: the venerable Swiss bank has agreed to pay a massive £550m fine rather than face criminal charges over its role in a massive tax evasion scam, where it helped thousands of rich Americans squirrel away some $18bn into secret offshore accounts. More significantly, the bank has also agreed to forego Switzerland’s long-held obsession with banking privacy, by giving up the names of any US account-holders involved in dodgy dealings. It’s a huge step in the war against banking privacy – and is likely to mean even more heat for offshore centres this year…
As part of a plea bargain, a shamefaced UBS admitted that it had broken the law by helping some 17,000 US citizens hide their savings away from the US Internal Revenue Service in undeclared offshore accounts. And it seems to have been an enthusiastic participant: one of its private bankers, Bradley Birkenfeld, has admitted to smuggling diamonds into the country hidden in his toothpaste for the benefit of a billionaire client (he’s now in jail, after accepting a lighter sentence in exchange for testimony). Although the Swiss banks have zealously guarded their clients’ privacy since time immemorial, UBS has acknowledged that this shouldn’t be used as a cover for fraudulent activity.
The scandal has been a disaster for UBS – last year the bank’s global wealth management business saw outflows of more than $100bn, as former boss Raoul Weil was declared a fugitive from justice and the US made it very clear that it wasn’t going to take this lying down. With the bank so obviously bang to rights, it’s no surprise to see the UBS top brass donning the sackcloth and ashes today – chairman Peter Kurer said he ‘sincerely regretted’ its improper behaviour. But at least this penitence – along with a whopping fine and a promise to clean up its act – has persuaded the US Government to waive criminal charges.
Still, it’s a big blow against the concept of bank secrecy, which is coming under increasing attack from cash-strapped governments around the world. Only this morning, Gordon Brown has been jumping on the bandwagon at his monthly press conference, demanding that ‘the whole world’ take action against regulatory and tax havens. Although with the UK previously described during his time at the Treasury as the biggest onshore tax haven in the world, he’s on slightly dodgy ground…
MT will be taking an in-depth look at the growing pressure on tax havens and offshore financial centres in our next issue – due out soon. Stay tuned to the site for more...
In today's bulletin:
RBS and Lloyds to add £1.5trn to national debt
UBS coughs up names and cash in US tax probe
B&Q UK slide drags down Kingfisher sales
Business blames bizzies for climbing crime costs
Employers worried about their health, not safety