WASHINGTON (AFP) — UBS bank vowed Thursday to stop offering offshore banking services in the US after legislators accused it and other banks of helping wealthy Americans hide about 1.5 trillion dollars in overseas tax havens.
Mark Branson, UBS' chief financial officer of global wealth management, made the vow Thursday as a Senate panel was told that the country had lost 100 billion dollars in revenue to tax cheats hiding money with the help of foreign banks.
"We have decided to exit entirely the business in question," Branson told the panel of senators.
The hearing centered on a 115-page report into alleged abuses by UBS in Switzerland and the smaller LGT Bank in Liechtenstein.
"The evidence we have been able to obtain breaks through some of the wall of secrecy to show that these two banks have employed banking practices that facilitate, and have resulted in, tax evasion by US clients," said Senator Carl Levin, who led the six-month investigation.
The offshore tax evasion problem is of "staggering proportions," said Senator Norm Coleman.
"These tax havens hold an estimated 1.5 trillion dollars in American assets, resulting in lost taxes of roughly 100 billion dollars," he said.
The OECD group of mostly industrialized economies estimates that between five to seven trillion dollars are held in tax havens or banking secrecy jurisdictions globally.
In response to the Senate probe, UBS, the world's largest manager of private wealth, said 19,000 of the 20,000 US client accounts in Switzerland were "undeclared" in the range of nearly 18 billion dollars.
US authorities have initiated enforcement action against 100 US taxpayers in connection with accounts in the secretive European principality of Liechtenstein after a former LGT employee provided tax authorities around the world with data on about 1,400 people with bank accounts.
The ex-employee, who has gone into hiding, gave the US probe panel 12,000 pages of documents related to US clients.
Former UBS banker Bradley Birkenfield had already pleaded guilty to conspiring to help US clients evade millions of dollars in taxes by hiding assets in Switzerland and Liechtenstein.
Another UBS official was detained as a "material witness."
The enforcement actions appear to represent the first time that the United States has criminally prosecuted a Swiss banker for helping a US taxpayer evade US taxes.
"The details of their tax evasion scheme are sordid enough," Levin said.
The Senate panel had also obtained a document showing that UBS provided its Swiss private bankers with training on how to detect surveillance by US customs agents and law enforcement officers while travelling to the United States, he said.
Branson told the Senate committee that the bank "genuinely regrets" failures in complying with US regulations.
He added that "we are working with the US government to identify the names of US clients who may have engaged in tax fraud."
Branson said client identity is usually protected under Swiss law, but not when a foreign government formally requests the information for a tax fraud investigation.
"We will fully support and assist that process," he said.
LGT denied the Senate's accusations and refused to appear at the hearing.
Liechtenstein told the panel it was in negotiations with the United States to enter into a tax information exchange agreement and with its European neighbors to expand tax cooperation in connection with an anti-fraud pact.
Levin showed a chart summarizing tax haven bank secrecy "tricks" uncovered during the probe -- banks using code names for clients, telling staff to use pay phones instead of business phones so authorities cannot trace calls, and giving staff encrypted computers when they travel so authorities cannot read any client information.
Other methods included funneling money through so-called transfer companies to cover the tracks of the funds and make audit difficult, and opening accounts in the names of foreign shell companies to hide the real owners.
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