UBS to Name Account Holders in New Era for Swiss Banking

By David S. Hilzenrath and Tomoeh Murakami Tse
Washington Post Staff Writers
Thursday, August 20, 2009

Time is running out for wealthy Americans with secret Swiss bank accounts, as they weigh whether they want to turn themselves in to the Internal Revenue Service or gamble that their names are not among the thousands set to be exposed in one of the U.S. government's most aggressive efforts to hunt down international tax cheats.

The Swiss government will turn over names of suspected U.S. tax dodgers who have held 4,450 secret accounts at banking giant UBS -- accounts that at one point together contained as much as $18 billion, U.S. officials said Wednesday. Further, the Swiss government promised to assist the United States in similar investigations at other Swiss banks, the IRS said.

The announcement follows a long-running effort by the U.S. government to penetrate Swiss bank secrecy, focusing first on UBS. The United States had been seeking a federal court order demanding that UBS identify the holders of 52,000 accounts. The Swiss government had promised to block such a disclosure, leading to weeks of negotiations, a settlement and then Wednesday's announcement.

"We will be receiving an unprecedented amount of information," IRS Commissioner Douglas Shulman said. "This agreement represents a major step forward with the IRS's efforts to pierce the veil of bank secrecy and combat offshore tax evasion."

The U.S.-Swiss deal is a blow to rich Americans who have availed themselves of Switzerland's legendary banking secrecy. Some UBS customers have participated in a leniency program, which began in March and expires Sept. 23, that allows them to come forward to the IRS in exchange for reduced penalties.

But others are the gambling type.

"You really have to think about whether you want to stick your head out and do this, or make the calculated judgment that your name is not going to be disclosed," said Robert W. Ray, a partner at Pryor Cashman who focuses on white-collar criminal defense and compliance issues. He said some of his clients have taken advantage of the leniency program but others are waiting on the sidelines to see what they should do.

He said that one complicating factor is that it is not clear how the names are being chosen. "I think there might be some clients who would have otherwise taken comfort in the fact that 'Well, my account is, relatively speaking, small. So if we're talking about a select number of names being turned over by the Swiss government, I don't really have anything to worry about.' But if this, for example, is a random sampling . . . would you want to take that risk? I think it's a complicated question."

Ray added: "I think this was carefully constructed that way to put people precisely in that situation -- really run in fear. Because it's likely to lead more people than are actually capture-able to come forward and do what they should do."

Experts said that the government's deal with the Swiss is the first of many likely to come.

"It's like a dog that's tasted the blood of its first victim," said Ron Geffner, a former enforcement attorney at the Securities and Exchange Commission who now heads the financial services group at Sadis and Goldberg. "It's clear that the concept of a perpetually safe tax haven is a fantasy that no longer exists."

Sen. Carl M. Levin (D-Mich.), who held hearings on UBS last year, called the U.S.-Swiss deal "at most a modest advance" toward ending abuses of bank secrecy.

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