ZURICH, Nov 18 (Reuters) - U.S. customers of bank giant UBS UBSN.VX are readying to fight Switzerland’s plans to allow Washington to peek into their Swiss-based accounts which could hurt the country’s prized bank secrecy laws, their lawyers said.
UBS, the world’s largest bank to the rich, is the target of a high-profile U.S. probe into whether the Swiss bank helped rich Americans evade taxes which the lawyers say is threatening the survival of Switzerland’s offshore private banking industry.
Swiss lawyers Andreas Rued and Thomas Fingerhuth said Swiss tax authorities have informed their two clients, both U.S. citizens, they plan to divulge details of their UBS Swiss accounts to the United States due to evidence of tax fraud.
The lawyers will fight the move, which they say would allow Washington to access Swiss bank accounts without precise evidence of individual tax fraud, in a development that could expose Switzerland to similar requests by other countries.
The investigation adds pressure on UBS, which is struggling to rebuild its name after making more writedowns than any other bank in Europe in the credit crisis and whose shares plunged to a fresh all-time low on Tuesday along with other bank stocks.
Rued told Reuters that Swiss tax authorities argue that his and other clients committed tax fraud when they put money in special purpose vehicles (SPVs) designed to exploit loopholes in the U.S. tax system, but he said these schemes were legal.
“According to Swiss law this is not even tax evasion, it is tax planning,” Rued said.
U.S. authorities have requested broad access to Swiss UBS accounts of U.S. clients as part of the tax probe. Last week they charged the UBS wealth management chief with conspiring to help U.S. clients hide $20 billion from the taxman.
Switzerland has a narrower definition of tax fraud than most jurisdictions and can ask Swiss banks for client data only when it has clear evidence that fraud was committed. Swiss Finance Minister Hans-Rudolf Merz has said the U.S. tax probe is no threat to the Alpine nation’s treasured bank secrecy. Swiss banks hold about $2 trillion or nearly one third of the world’s offshore assets
Rued said he knew of 120 cases involving UBS’ American clients pending. Swiss media have said Switzerland was looking into handing over data from 250 U.S. customers of UBS.
The U.S. Internal Revenue Service has said UBS is concealing the assets of about 17,000 U.S. clients. UBS has separately started to hand over data related to onshore U.S. accounts.
The Swiss Finance Ministry said last week it had not yet transferred any UBS bank account data to the United States. It and the Swiss Federal Tax Authority declined to comment on Tuesday. UBS also declined to comment.
Fingerhuth, a partner with Swiss law firm Langvier, told Reuters Swiss authorities informed his client of the decision to hand over his bank account data to the United States 10 days ago. He plans to file against the decision in court.
Under Swiss law, clients have up to 30 days to appeal to the Swiss Federal Administrative court against a decision to hand over data to another jurisdiction.
“If the decision is upheld in the Federal Administrative Court the consequences would be extremely severe since it would mean the end of offshore private banking in Switzerland,” Rued also said.
UBS decided earlier this year to stop offering offshore Swiss accounts to U.S. citizens.
Switzerland’s bank confidentiality goes back centuries but was codified in the early 1930s as Nazi Germany put pressure on the country to try and access assets of fleeing Jews.
It subsequently became associated with tax evasion as the rich of the world start pouring money into the Alpine state.
To see a FACTBOX on bank secrecy protection in Europe, click on [ID:nLD684227]
Editing by Jon Loades-Carter