UBS Closing Down Thousands of Accounts
Saturday, November 15, 2008
Swiss banking giant UBS, under investigation by the U.S. government for allegedly helping Americans hide money from the Internal Revenue Service, is closing thousands of accounts, putting clients at greater risk of being exposed, tax lawyers say.
UBS clients have been receiving calls and letters telling them that their Swiss accounts will soon be liquidated. Those who have concealed funds from the IRS have two basic choices: They can take new and potentially difficult steps to hide the money, heightening their risk of being caught and punished severely, or they can come clean, lawyers say.
The backdrop for UBS's action is that the U.S. government has been pressing UBS and the Swiss government to disclose the names of thousands of Americans with undeclared accounts, while the Swiss have vowed to uphold Swiss legal protections for bank clients.
However, as a practical matter, whether or not the Swiss formally give up the names, UBS's decision to close the accounts undermines Switzerland's legendary code of bank secrecy, lawyers said.
"I think the bank's actions here are likely to compel clients to come out into the open," said Scott D. Michel, an attorney with the law firm Caplin & Drysdale. "It is a step in the direction of the erosion of bank secrecy," he said.
UBS's action forces affected clients "to play some hand," and "therein lies the great trap," said lawyer William M. Sharp Sr. of Sharp & Associates.
UBS, which is Switzerland's largest bank, hinted at the possible consequences in a recent letter to an American depositor.
"[W]e are unfortunately not longer able to provide you with our banking services and are herewith providing you notice to terminate your current banking relationship . . . 45 days from the date of this letter," read one piece of correspondence from UBS in Zurich to an overseas representative of the client.
"Depending on your individual circumstances, UBS further recommends that you consult with your U.S. tax advisor or tax preparer to file, if necessary, amended U.S. tax returns pursuant to the IRS's Voluntary Disclosure Program," UBS wrote.
The letter was read to The Washington Post by a person who spoke on condition of anonymity because of the sensitive nature of the matter.
The letter said that if UBS didn't receive instructions from the client, it could liquidate the client's assets and either send a check for the balance or hold a check for the client to claim.
Other UBS clients haven't been as lucky. They have received phone calls from UBS informing them that if they want their money they must pick up their checks at UBS in Switzerland, a lawyer for the clients said, speaking on condition of anonymity to discuss sensitive matters.