UBS to name 4,450 US clients in tax-evasion probe

BERN: UBS agreed to reveal the identities of some 4,450 American clients in a landmark out-of-court settlement of a US tax-evasion case that challenged Switzerland's sacrosanct banking secrecy.

UBS and the US and Swiss governments signed agreements capping months of diplomatically sensitive negotiations over the US probe of tax scofflaws with secret accounts at the world's largest wealth manager.

Under the US-Swiss agreement, UBS is to provide the names of approximately 4,450 American clients who are suspected of avoiding US taxes by hiding assets in Switzerland's biggest bank.

The US government estimates the amount of those hidden assets at more than 18 billion dollars.

Hours after the announcement, the Swiss government said it was selling its nine percent stake in the ailing bank.

"The Federal Council (government) has decided to immediately and completely end its commitment" to UBS, a finance ministry statement said.

The Swiss finance ministry said the out-of-court settlement would "significantly contribute to sustaining and reinforcing confidence in the bank, which will thus be better able to pursue its reorganization and restructuring."

UBS, in a separate agreement with the US government, said it would advise its US clients that they can appeal the US complaint in a Swiss court and encourage them, "if appropriate," to take advantage of the US Internal Revenue Service's voluntary disclosure program.

The IRS warned that persons identified through the agreed disclosure process would not be eligible for the program, due to end on September 23.

The embattled UBS, hit hard by the global financial crisis, said the agreement averted the payment of a financial penalty.

"This agreement helps resolve one of UBS?s most pressing issues," said UBS chairman Kaspar Villiger.

In a February 19 civil complaint, US authorities had accused the Swiss bank of "systematically and deliberately" violating American laws by promoting offshore accounts to American citizens.

They demanded that UBS turn over the names of as many as 52,000 American account holders.

The civil case stemmed from an out-of-court settlement of a US criminal complaint in which UBS admitted to tax fraud by inviting US clients to open accounts in Switzerland and thus avoid declaring their income to the US.

The bank paid 780 million dollars and identified some 300 US clients to settle the criminal case.

Under Swiss banking secrecy law, banks in Switzerland are prohibited from divulging information to authorities or third parties about their clients, except in cases involving recognized criminal investigations.

The United States said the deal would unlock an "unprecedented" amount of information on potential American tax dodgers while the Swiss government said its laws -- including banking secrecy -- would not be infringed.

"This is no mere keyhole into the hidden world of bank secrecy," said IRS head Doug Shulman, who thanked the Swiss government for its cooperation.

"This agreement represents a major step forward with the IRS's efforts to pierce the veil of bank secrecy and combat offshore tax evasion. It?s an historic development in our international efforts, and it helps build a solid foundation for addressing future offshore issues."

The Swiss government said it had agreed "to process within one year" the US request for information on the accounts.

"The affair is far from settled, its application is extremely complex," Swiss Justice Minister Eveline Widmer-Schlumpf told journalists.

The IRS and the US Justice Department said in a joint statement the agreement "will result in the IRS receiving an unprecedented amount of information on United States holders of accounts at the Swiss bank UBS."

They also noted the Swiss government had agreed to review and process requests for information on account holders of other banks, "to the extent that such a request is based on a pattern of facts and circumstances equivalent to those of the UBS case."

That cooperation is already provided under a bilateral dual-tax agreement signed in June.

Manuel Ammann, a finance professor at the University of St. Gallen, cautioned that Swiss banks were facing a long-term erosion of one of their key assets -- secrecy.

"From the customer's point of view, banking secrecy is no longer watertight," he told the Swiss news agency SDA.