The shadowy world of Swiss banking — with its secret off-shore accounts and undetectable financial transactions — was dramatically and publically exposed when UBS, AG, Switzerland’s largest bank, entered into a “deferred prosecution agreement” with the U.S. Justice Department on tax massive fraud charges.
UBS must pay a $780 million fine (roughly four years of profits from their criminal enterprise), identify all U.S. clients and stop supplying secret accounts to U.S. taxpayers.
UBS was charged with tax fraud because it voluntarily agreed with IRS to report income and withhold taxes on U.S. taxpayers, then it deliberately evaded its responsibilities by using sham entities and fictitious names to open new accounts.
The government contends that from late 2002 to 2007, UBS helped U.S. taxpayers illegally hide $20 billion, thereby evading $300 million in taxes annually.
Acting like James Bond, UBS bankers travelled to the U.S. at least 3,800 times, using encrypted laptops and other counter-surveillance techniques to prevent the detection of the identities and offshore assets of their U.S. clients.
UBS provided U.S. clients with high-tech gadgets containing specially coded computer chips that allowed clandestine access to their accounts and transfers of their wealth. The passwords changed each time the accounts were accessed.
The Justice Department has demanded that UBS disclose the identities and banking records of 52,000 suspected U.S. tax cheats.
The disclosure could ruin Switzerland’s vaunted bank secrecy laws and cripple its international banking system. However, disobeying a court order requiring disclosure would cause UBS to default under the deferred prosecution agreement and its top executives could be indicted on felony tax charges.
Those U.S. taxpayers with Swiss bank accounts should be, understandably, quaking in their Gucci loafers.
IRS is warning them to come forward voluntarily before they are indentified, or they could be staring at serious criminal tax evasion charges.