UBS will stop offering offshore banking services to US citizens through non-US branches, the world’s largest wealth manager said on Thursday.
Via Bloomberg:
“We have decided to exit entirely the business in question,” Mark Branson, CFO of UBS’s global wealth unit, said at a hearing in Washington. “UBS will no longer provide offshore banking or securities services to US residents through our bank branches. Such services will only be provided to residents of this country through companies licensed in the United States.”
UBS in November stopped opening Switzerland-based accounts for US clients, though it continued to service some existing clients. The bank will now ask its US clients to transfer assets to an account at one of the UBS entities that are regulated by the Securities and Exchange Commission, spokesman Serge Steiner said.
Relationships with clients who don’t want to transfer to a US-regulated unit will be terminated “in an orderly fashion” within the next 24 months, he added, declining to say how many customers are affected by the bank’s decision.
What prompted this? Nothing short of a series of damning tax-evasion probes that implicated both UBS and Lichtenstein-based LGT Bank.
According to a report by the Senate Permanent Subcommittee on Investigations, UBS hid as much as $17.9bn for 19,000 Americans who failed to declare assets to the IRS.
Offshore banking for US clients accounted for around $200m in revenue annually at UBS, according to testimony from former banker Bradley Birkenfeld, who last month plead guilty to helping a client evade the IRS.
But the real pain is yet to come – and it won’t just be the banks that feel the hurt.
According to an excerpt from the prepared astatement of IRS Commissioner Douglas Shulman (H/T: Money-RX blog):
We are also considering a regulation to have QIs [Qualified Intermediaries] report US taxpayers’ worldwide income to the IRS in certain cases– not just US source income.
As for those naughty UBS clients, Shulman says:
The summons directs the bank to produce records identifying U.S. taxpayers who had accounts with the bank in Switzerland between 2002 and 2007 and elected to have their accounts remain hidden from the IRS. On July 1st a federal judge in Miami approved a Justice Department request to enable the IRS to serve the summons. We are working closely with the Justice Department to ensure that we get the information requested in the summons. Accordingly, the IRS is exploring our options on how to bring a potentially large number of U.S. taxpayer cases to resolution.
Open season on any remaining tax evaders, then.
As 1440 Wall Street’s @StockJockey noted tweeted wryly:The last private client should turn out the lights
Related links:
The PSI report in full – PDF
UBS used ‘cloak of secrecy’ on US tax – FT.com
UBS, LGT Helped Tax Evaders – Money Rx blog