Swiss Bank to Turn in U.S. Tax Evaders


The largest bank in Switzerland has reportedly entered into a deferred prosecution agreement with federal authorities in the U.S. The country’s secretive banking industry has long been attractive to wealthy clients as an avenue to avoid paying taxes.

On Feb. 18, the Department of Justice announced UBS accepted the agreement and will pay $780 million in fines, penalties, interest and restitution. It also agreed to provide U.S. tax authorities with the names and account information of approximately 250 U.S. customers. Under the agreement, UBS will cease providing banking services to U.S. clients with undeclared accounts.

The agreement will allow the bank to resolve criminal conspiracy charges associated with helping its customers defraud the Internal Revenue Service. Federal authorities had been investigating about 19,000 suspicious UBS accounts, which are believed to have held $20 billion between 2000 and 2007. According to the IRS, these accounts may have helped U.S. taxpayers evade $300 million per year in taxes.

The settlement with UBS is believed to be the largest of its kind. The U.S. government may prosecute UBS executives if the terms of the agreement are not fulfilled.

During June 2008, a U.S. District Court allowed the IRS to serve UBS with a “John Doe” summons to demand information on accounts that may have been used to hide money from U.S. tax authorities. As a “John Doe” summons does not have to name individual suspects, the summons cast a wider net to catch potential tax evaders with the ultimate goal of issuing criminal charges against as many as possible.

As a result of the UBS investigation, Credit Suisse is now asking its wealthy American clients to sign W-9 tax forms that will disclose their names, addresses and tax identification numbers. The W-9 form also requires the bank to withhold taxes that may be owed to the IRS, at a rate of 28 percent.

IRS Commissioner Doug Shulman issued a statement saying those people who have used offshore bank accounts to evade taxes should regard the UBS agreement as a directive to “get right with their government.” Those who do not heed the warning may risk criminal prosecution for tax evasion or tax fraud.

Swiss Finance Minister Hans-Rudolf Merz has announced Switzerland’s treasured banking secrecy remains in place, but added such secrecy is not in place to protect tax fraud.