UBS is pressured to turn over Swiss tax shelter client names

Last week, the Securities and Exchange Commission filed an enforcement action against global financial services firm UBS AG, charging the firm with acting as an unregistered broker-dealer and investment adviser.

The SEC's complaint, filed in the U.S. District Court for the District of Columbia, alleged that UBS's conduct facilitated the ability of certain U.S. clients to maintain undisclosed accounts in Switzerland and other foreign countries, which enabled those clients to avoid paying taxes related to the assets in those accounts.

UBS agreed to settle the SEC's charges by consenting to the issuance of a final judgment that permanently enjoins UBS and orders it to disgorge $200 million. In connection with a related criminal investigation, UBS has entered into a deferred prosecution agreement with the Department of Justice pursuant to which UBS will pay an additional $180 million in disgorgement, as well as $400 million in tax-related payments.

In addition, UBS has turned over the names of nearly 300 clients who owned the Swiss accounts. International news agency AFP is reporting that UBS rejected a new U.S. government lawsuit filed late last week asking that the bank disclose the identities of some 52,000 U.S. customers who allegedly evaded taxes. The U.S. government estimates approximately $14.8 billion is hidden in the Swiss accounts.

UBS is being accused by the IRS of helping its clients hide money from U.S. taxing authorities. "At a time when millions of Americans are losing their jobs, their homes, and their health care, it is appalling that more than 50,000 of the wealthiest among us have actively sought to evade their civil and legal duty to pay taxes," the acting assistant attorney general, John DiCicco, said in a statement.

The IRS is encouraging UBS account holders to voluntarily come forward and file amended returns reporting the income that has been hidden overseas, pay the back taxes, interest, and a negotiated penalty in exchange for potentially avoiding a prison sentence for tax evasion.

"Now is the time for all taxpayers, and those who ought to be taxpayers … to come forward in order to hopefully preserve their future freedom," said Charles Rettig, a lawyer with Hochman, Salkin, Rettig, Toscher & Perez in Beverly Hills, according to a report in USA Today. His law firm represents more than 100 clients who either have or are in the process of disclosing their holdings to the IRS. "Those who ignore this window of opportunity may well find themselves in prison for tax evasion."

Experts speculate that this situation with USB could be the beginning of the end of the anonymously held offshore bank accounts that makes up a large part of the Swiss banking industry. "Swiss banking secrecy will not exist in today's form in two or three years," said Dirk Nitzsche, a senior finance lecturer at Cass Business School in London, according to a Bloomberg Press report.

UBS has been given until April 30 to respond to the U.S. lawsuit demanding disclosure of the names of 52,000 Swiss account holders. Should UBS refuse, a trial is scheduled for July 13.

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