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UBS to Clients, “You’re on the List!”


tax evasionSwiss banking giant UBS, announced that it will inform American clients whether information about their bank accounts will be turned over to the US Justice Department in a tax evasion investigation.  UBS is required to disclose information on over 4,300 American citizens who are clients of the firms private banking division.  The US Justice Department believes that wealthy Americans are using these accounts to conceal assets and are using the bank to hide money under the protection of Switzerland’s storied bank secrecy laws.

UBS has so far refused to name the individuals in public. U.S. authorities, meanwhile, have hoped that the identities of the individuals on the list would be kept secret for longer so that more Americans with undeclared assets abroad might come forward under a recently extended tax amnesty program.

According to a bank  spokesperson,  “UBS is currently examining which client relationships fulfill the government’s criteria of ‘tax fraud.”  The review may take some months but UBS is committed to informing clients that they are affected by the tax evasion investigation.  UBS has already informed 500 clients that they are the subject of an investigation by the US Justice Department.

The IRS on Monday said it would extend its deadline for an amnesty program that has been flooded with applications from people who hid assets overseas. The program promises no jail time and reduced penalties for tax dodgers who come forward.

The financial services industry can expect these types of investigations to become more commonplace.  Institutions that offer hedge funds and investment products that cater to High Net Worth investors will increasingly become  subject to greater scrutiny as the US Treasury Department and its enforcement arm the IRS moves to insure that compliance with tax laws and statutes are adhered too.

This resolution signifies that the IRS is serious about its intention to ramp up enforcement of the tax code.  The IRS has enhanced its focus on US citizens and corporations utilizing foreign banks and offshore investment vehicles.  The agency is concerned that investment products and financial services offered by foreign banks have enabled US citizens and corporations to avoid tax liabilities.  Products such as credit cards, hedge funds and other investment partnerships are coming under the exacting microscope of the IRS.

The IRS is under pressure to enforce compliance with federal tax statutes.  The US Treasury coffers are seriously depleted  and the IRS is is looking to assure all taxable revenue streams are identified and taxpayers pay taxes on all capital gains and income.  The IRS has developed an Industry Focus Issue, (IFI) audit strategy.  IFI’s provides IRS field auditors tax risk profiles of investment partnerships and other corporate entities that use offshore domiciles to harbor assets.  IFI guides field audit personnel through a risk based assessment of investment partnerships.  The IFI aggregates and ranks  Three Tiers of high risk tax compliance issues.  Examiners will conduct rigorous reviews of these issue sensitive factors.  Many of the factors concern the recognition of income and assets in custody outside of the US and repatriation of revenue derived in foreign domiciles.

Sum2 has published a product, IRS Audit Risk Program (IARP) that guides corporate tax managers and tax professionals through a risk assessment of their exposure to IFI risk factors.  The IARP is a strategic tool that corporate tax professionals utilize to score risk exposures, determine mitigation actions, estimate remediation expenses and manage tax controversy defense strategies.  The IARP is available for purchase on

You Tube Video: O’Jays, For the Love of Money

Risk: tax evasion, compliance, reputation, prison

September 22, 2009 - Posted by | Uncategorized | , , , , , , , , , , , , , , , , , , , , , , , , ,


  1. The release of names will not be immediate. UBS will notify the U.S. account holders who are on the list. UBS will also give the files to the Swiss Government so that the Swiss Government can make a determination whether to share each name with the IRS. The US account holders will also be able to challenge the release of information within the context of the Swiss legal system. This buys the US account holders some time. However, time is not on their side with respect to the IRS’ Voluntary Disclosure Program, which expires on Sept. 23. Americans with non-compliant accounts at UBS should come forward soon.

    Comment by Jon | September 22, 2009 | Reply

    • Jon,

      Excellent points Jon. The Swiss authorities will review each account to determine if information should be disclosed and turned over to the US Justice Department. This action represents a major sea change in the private banking business practices for the Swiss. You are also correct in pointing out that if US citizens wish to take advantage of the amnesty program they should not risk the determination of Swiss banking authorities weather to disclose account information to the US Justice Department.

      The deadline for the IRS Voluntary Disclosure Program has been extended to October 15th. See sum2llc post

      Thank you for your comments.

      Comment by riskrapper | September 23, 2009 | Reply

  2. Greetings:

    This may be of interest to readers:

    While dual citizens may be entitled to sympathetic treatment wealthy tax evaders and those who facilitated this form of tax evasion are not entitled to leniency. To do otherwise, robs the U.S. of moral authority when it attempts to promote the rule of law.

    Ethan S. Burger

    Comment by Ethan S. Burger | September 24, 2009 | Reply

    • Thanks for your comment Ethan. As you point out there is a moral hazard aspect to this issue. There is also a tax regulatory arbitrage issue. Utilizing domiciles with favorable tax laws to protect assets and revenue derived from a domicile with a less accommodating tax structure is an issue that needs to be addressed. This is particularly pressing considering the massive budget deficits many countries are confronted with.

      Comment by riskrapper | September 24, 2009 | Reply

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