ZURICH UBS AG, the world's largest bank to the rich, has passed on information about 70 clients to U.S. authorities investigating tax evasion, a move that may undermine Switzerland's prized bank secrecy, the Washington Post reported.
UBS UBSN.VX was responding to a Justice Department request for information on Americans who held "undeclared" accounts at the bank in Switzerland, the U.S. paper said on its website, citing an unnamed source close to the case.
A UBS spokesman said the Swiss bank had not passed on information about Swiss-based clients to the United States.
"UBS has not provided any Swiss-based client data to the U.S. authorities," the spokesman said, but would not comment on whether Swiss tax authorities had passed on such data to their U.S. counterparts.
He added that UBS was "continuing to work diligently with both Swiss and U.S. government authorities, consistent with Swiss law -- including bank-client confidentiality -- and the legal frameworks for intergovernmental cooperation and assistance established between Switzerland and the U.S."
The U.S. tax investigation risks compounding damage to UBS's reputation at a time it has been forced to make bigger writedowns than any other European bank in the credit crisis.
The U.S. Department of Justice is investigating UBS over offshore services provided to U.S. clients from 2000 to 2007 to find out whether UBS helped wealthy Americans dodge taxes.
The Swiss bank was singled out by U.S. President-elect Barak Obama as one of the banks who helped "tax cheats." It decided earlier this year to stop offering offshore Swiss bank accounts to U.S. citizens.
Meanwhile, Switzerland is facing increasing pressure from neighboring Germany and other EU countries to give up on its tradition of closely guarding details of its bank clients.
UBS had turned over the 70 client names to the U.S. government over recent months, the Washington Post said.
The paper added that criminal investigators had obtained the names of an additional 30 U.S. holders of undeclared UBS accounts from other parties.
Under an existing agreement between Switzerland and the United States, the U.S. can ask Berne for help in obtaining information on Swiss bank accounts in the case of tax fraud, but not tax evasion, which is not a crime in Switzerland.
Once a request is handed to the Swiss authorities, a domestic investigation takes place and data are handed over only if and when Swiss tax authorities have evidence fraud did occur.
A Swiss bank account holder has the right to appeal against such a decision.
The U.S. Internal Revenue Service (IRS), which has joined the Justice Department in the UBS probe, has asked Swiss tax authorities for assistance in obtaining information relating to U.S. clients of UBS, the bank said in its third-quarter report.
The IRS has also issued a civil summons and the District Attorney for the County of New York has issued a request for information located in the U.S. concerning the Swiss bank's cross-border business. Such information could be obtained without the involvement of Swiss authorities.
The Swiss Finance Ministry and the U.S. Justice Department were not immediately available to comment.
A Swiss newspaper reported last month that the Swiss authorities had given 250 U.S. clients of UBS 30 days to appeal against their names being handed over to the United States authorities. UBS declined to comment on that report.
(Additional reporting by Martha Graybow; Editing by Will Waterman and David Holmes)