UBS will disclose 4,450 names of suspected tax cheats
— -- Swiss banking giant UBS has agreed to gradually turn over account data for 4,450 wealthy American clients suspected of tax evasion, U.S. and bank officials announced Wednesday, striking the deepest crack yet into Switzerland's historic reputation for banking secrecy.
IRS Commissioner Douglas Shulman, who announced the deal in the internationally watched tax standoff, said the accounts at one time held an estimated $18 billion in assets.
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He declined to say how much the IRS expects to recover in back taxes, interest and penalties once the account data is turned over.
The UBS holdings, some of which have been closed, include regular bank accounts, custodial accounts and nominee accounts suspected of being "sham trusts," Shulman said.
UBS has an estimated 52,000 accounts involving U.S. customers. But some of those owners have previously disclosed their holdings to the IRS, said Shulman. He described the 4,450 accounts stipulated in the deal as "what we wanted all along" — the holdings most suspected of tax evasion.
"We will be receiving an unprecedented amount of information on taxpayers who have evaded their tax obligations by hiding money offshore at UBS," Shulman said.
Under the unprecedented agreement, UBS will start notifying account holders shortly that their financial data will be turned over to U.S. investigators. The bank will give the account data to the Swiss Financial Tax Administration, which will decide which accounts will be turned over to IRS investigators.
The decisions will be subject to Swiss judicial review, but the Swiss government will expedite the handling of such challenges, IRS officials said. It is expected to take months before federal investigators receive financial data for all the accounts, IRS officials said.
UBS earlier this year handed over financial data for about 250 American-owned accounts that bore specific evidence of tax evasion. Federal prosecutors have filed criminal cases involving four of the account owners in recent months. Between that previous handover and the new agreement, the IRS expects to get information for more than 5,000 UBS accounts.
U.S. clients who receive notification that their UBS account data will be disclosed under Wednesday's agreement will remain eligible for an IRS voluntary disclosure program under which those who come forward are offered lesser penalties, Shulman said. The deadline for entering the program is Sept. 23.
Saying the IRS has no current plans to extend the deadline, Shulman urged Americans with secret accounts at UBS and other foreign banks to "get right with your government" by disclosing the holdings and paying taxes owed.
The agreement signals the tentative end of a federal court battle in which the IRS and Justice Department targeted UBS, Switzerland's largest bank, amid evidence that it secretly sent bankers to the U.S. to help American clients hide assets and income offshore without paying taxes.
UBS in February agreed to pay $780 million in a settlement that deferred federal prosecution. But, until the deal signed Wednesday was reached last week, UBS balked at turning over most of the account data demanded by the IRS.
The bank argued that releasing the data would represent a criminal violation of Swiss banking secrecy laws. The Swiss government backed that contention, and had even threatened to seize the account data to prevent it being handed over to the IRS.
Saying the deal "helps resolve one of UBS' most pressing issues," bank Chairman Kaspar Villiger said UBS "welcomes the fact that the information-exchange objectives of the settlement can be achieved in a lawful manner under the existing treaty framework between Switzerland and the United States."
The Swiss Bankers Association said the agreement "avoids a prolonged legal battle that would have had an uncertain outcome and UBS can now continue with its consolidation process in an atmosphere free of this legal uncertainty."