Results tagged “IRS investigation”

A preliminary agreement has been reached in the tax evasion dispute between Swiss Bank UBS and US authorities.

UBS has agreed "in principle" to hand over records of 5'000 of the biggest accounts that allegedly conceal unreported wealth.The agreement diffuses a potentially embarrassing conflict between Swiss and US authorities.

Although the US government originally sought up to 52'000 names, the expectation that these accounts will reveal the most blatant offenders allows them to save face.

The worry for offshore account holders now, is whether this tentative agreement will serve as the launch pad for further probes into other offshore banking centers.

Swiss officials maintain that this development does not compromise the country's bank secrecy laws.

According to Swiss newspaper reports, U.S. authorities are seeking records of American UBS clients visited by Swiss bankers from 2001-2007.

The US is seeking around 52,000 US offshore account holders suspected of tax evasion, and an estimated 10,000 may be implicated in the latest probe.

UBS has already acknowledged that it broke U.S. law by setting up offshore banking operations in the US. As a result, the release of this information would not infringe upon bank secrecy laws, since meetings were held with clients on US soil.

The bank has already agreed the handover of 250 client records, seen as a massive blow to Swiss bank secrecy. It is thought that these 10,000 new leads may be the middle ground for compromise rather than handing over all 52,000. It is not certain how many of the 10,000 actually committed a crime.

While the US authorities can go around Swiss bank secrecy laws where international banks have carried out operations on US soil, private banking operations carried out solely within Switzerland still benefit from full banking secrecy.

Credit Suisse is taking further measures to protect itself, by ordering thousands of its American offshore banking clients to leave or face declaring their account details to the IRS.

The Swiss newspaper Sonntadszeitung has reported that US customers have the option to move their funds to a Credit Suisse subsidiary, CS Private Advisers, which would reveal their accounts to US authorities, or receive a cheque for the balance of their funds.

UBS, Credit Suisse's larger rival, paid US authorities $780m to settle a case brought against it by the US justice Department, in which it was accused of helping wealthy US clients evade taxes. UBS also agreed to name 250 of its clients. Credit Suisse may be offering this choice to its US customers to avoid a high-profile UBS-type investigation. Credit Suisse has between 2,500 and 5,000 US clients with 3bn Swiss Francs in undeclared funds, according to Swiss media sources. 

In a statement, Credit Suisse downplayed any notion of a legal crisis: "Credit Suisse adheres to the highest compliance standards, applicable laws, regulations, and policies..We offer both domestic and international wealth management services to US clients in compliance with all applicable laws, regulations, and policies."

UBS have forced out a top executive who formerly handled secret offshore bank accounts for wealthy Americans. The news comes as US authorities and the Swiss bank continue to lock horns in a tax fraud investigation centering on rich US citizens with undeclared offshore bank accounts.

The man in question, Martin Liechti, was put on paid leave according to a UBS spokesman. It is understood that the two parties are negotiating an exit agreement that might be acceptable to both.

Its not the first time Liechti has been in the news. In May of last year he was taken in for questioning by US authorities as part of their investigation into alledged tax evasion by UBS's US clients.The banker was detained for several months before being released and returning to his native Switzerland, a move which shocked many in the world of swiss offshore banking and beyond. Some Swiss private banks are now barring foreign travel for their top executives fearing similar arrests.

His removal will invite speculation as to how much information he gave the US authorities during his detention, and how much UBS are willing to give, as US pressure to break the legal stalement increases.

Liechti is not the only member of UBS top brass to leave the bank recently. The CEO,  chairman and several private bankers have all resigned or been forced out in the past few months.

The IRS is working out revised rules for its Qualified Intermediary program, which allows the U.S government to keep track of American money abroad.

As Senior IRS lawyer said the US was working in tandem with other high-tax Governments to round up tax evaders with accounts in offshore tax havens.

"We are concerned about U.S. people hiding their assets and not reporting their correct worldwide income," said Steven Musher, IRS associate chief counsel for international issues.

A date was not given for the release of the revised QI rules, but Musher suggested they may not be overly oppressive in order to allow banks some legroom, "We are trying to achieve the balance between increasing the reliability and quality of documentation to serve these various competing purposes," he said.

The IRS is keeping quiet on its latest action against UBS, with senior UBS officer Mark Branson to face a  U.S. Senate Permanent Subcommittee today.

Swiss offshore banking could the one to face the brunt of the tax haven crackdown with politicians unlikely to remain aloof from the media and public opinion.

Switzerland's finance minister has raised the possibility of bargaining in certain cases over Swiss bank secrecy.

"Certain matters of fact must be up for debate," said Hans-Rudolf Merz, who also holds the country's presidency.
"We will perhaps have to make concessions in some cases or others.'

Merz also suggested that Switzerland may have to make these concessions in order to avoid the threat of inclusion on an OECD or G20 blacklist that would see Switzerland branded as an un-cooperative tax haven.

French President Nicolas Sarkozy has already hinted that Switzerland would be blacklisted if the current situation continued.

Being put on a blacklist could mean economic sanctions against Switzerland or directives ordering banks in OECD/G20 countries to either not bank with Switzerland or apply much stricter regulations on funds of Swiss origin.

There is speculation over whether such 'concessions' would mean fundamental changes in Swiss offshore banking and bank secrecy, or merely the release of more UBS clients currently under investigation.

Calls for changes to the secrecy law have met with almost universal dissaproval domestically, with many Swiss unwilling to change centuries of tradition or risk harming the 'golden goose' that funds a huge banking sector.

At a Tax Council Policy Institute conference the IRS 'comissar' Douglas Shulman has reiterated his desire to target individuals and companies with secret offshore bank accounts,

''Clearly there have been some high profile cases in the
news recently. We have been steadily increasing pressure on
offshore financial institutions that facilitate concealment of
taxable income in the U.S...That pressure will continue under my watch,"

Although he would not comment on the UBS case, Mr.Shulman urged US citizens with offshore bank accounts to utilize the IRS's Voluntary Disclosure Program and thereby 'most of the time' avoid criminal prosecution or worse.

Despite already reaching a first settlement with UBS, the US goverment is now suing the Swiss Bank to reveal even more offshore account holders, clearly not satisfied with its current share of the estimated 52,000 American offshore accounts held at the bank.
 
It is not clear whether the IRS really hopes to get them all or if they are just using the threat of litigation on such a giant scale to encourage US clients at UBS (and offshore account holders worldwide) to start reporting.

Shulman said US authorities were scoping out "a wide range
of options to address offshore tax abuses," without going into further details.

It is thought that possible measures could include economic sanctions against tax haven countries, given that many are highly dependent on high-tax countries for their own livelihood.

UBS for its part has sworn to fight back against these latest charges.

Swiss banking secrecy has come under fire recently because of the media focus on UBS, Credit Suisse and their US clients. With the volume of news dedicated to the subject you could be forgiven for thinking that bank secrecy in Switzerland is a thing of the past, that Switzerland has handed over the keys to the castle, defeated.

Most media would like to suggest that some great development has occurred and their output reflects this, but if you take a second look you will find that relatively little has actually happened.

The IRS has been campaigning since last July to prize open details of US account holders at UBS and what has it got to show for it? Out of a suspected 52,000, just 12 names have been promised them. Even these 12 aren't for sure, because they still have the right to appeal the decision under Swiss law.

Of course its in the interest of the US government to keep this issue in the news because it gets people scared about using offshore accounts, and may even result in some UBS account holders handing themselves over . Tax Lawyers too have a field day letting it be known that they are the only solution for these luckless UBS types. Bu is it not just a case of smoke and mirrors concealing the fact that, despite everything, Swiss bank secrecy hasn't changed, and violation of the law still carries a prison sentence?

UBS and Credit Suisse have made themselves targets by opening offices in the US and therefore making themselves subject to US law. The Swiss Federal Council simply
acknowledged that when it agreed to allow the US Customer information to be
given to the IRS. For those banks without a US presence there has been no operational change - Switzerland will still put people in jail for violating bank secrecy.

In fact private banks and trust companies have been reminded by authorities that they will be prosecuted if they violate the Secrecy Act.

It is no more in Switzerland's interest to start unraveling client confidentiality than it is in the interests of those American UBS clients to have their personal details revealed. Although it may have to walk a fine line in order to keep the US from swallowing it whole, bank secrecy remains intact and there are no plans to change it.