UBS says it will drop some services for U.S. clients

ByABC News
July 17, 2008, 11:42 PM

— -- A major Swiss bank said Thursday that it would stop offering offshore banking services to U.S. clients through its non-regulated Switzerland branches after a Senate investigation disclosed evidence the services helped Americans evade federal income taxes on billions of dollars in assets.

Mark Branson, chief financial officer of global wealth management for UBS, made the announcement at a hearing by the Senate Permanent Subcommittee on Investigations, which found that UBS bankers used encrypted computers, code words and other tactics to help wealthy U.S. clients hide assets.

Outlining steps that could trigger shock waves in the offshore banking industry, Branson said UBS had "decided to exit entirely the business in question."

UBS will now only provide offshore banking services to U.S. clients "through companies licensed in the United States," a change that in theory would make it easier for the IRS to examine the transactions. The bank said it would ask clients in the U.S. to transfer to one of its three U.S.-regulated units.

Branson added that Swiss-based UBS wealth management specialists "will not be permitted to travel to the United States for the purpose of meeting with U.S. clients." The change addressed evidence the bankers used encrypted computers and codes to avoid reporting requirements during client trips to the U.S.

Also, Branson said UBS is working with the U.S. Department of Justice, IRS and Securities and Exchange Commission "to identify the names of U.S. clients who may have engaged in tax fraud."

Although Swiss banks have long been renowned for client secrecy, Branson said, "such privacy protections do not apply" in cases of alleged tax fraud.

U.S. investigators recently served UBS with a court summons for the information, bank spokeswoman Karina Byrne said. Senate evidence showed about 19,000 U.S. clients hold billions of dollars in assets in UBS accounts not reported to the IRS. Byrne said it was unclear how many of those clients might be targets.