US and UBS Case Reaches Agreement

August 4, 2009 International Tax CooperationOffshore BankingTaxation in SwitzerlandTaxation in USA  No comments

An agreement has been reached in the negotiations between UBS and the US, tentatively resulting in the disclosure of 5,000 account holder names and no fines for UBS.

The recent legal wrangle between the Swiss bank UBS and the US Department of Justice (DoJ), in a case filed on behalf of the Inland Revenue Service (IRS), looks like it could come to a relatively placid end. It was announced that the two parties have come to an agreement “in principal”.

While the US originally sought the names of 52,000 American UBS account holders, it now seems willing to settle for the 5,000 largest accounts. The sought after names are all under suspicion of evasion of US taxes through their Swiss offshore accounts. Exact details are yet to be brokered, but the situation looks like it could end with no fines imposed on UBS.

Swiss diplomat Michael Ambuehl stated that the current incarnation of the deal would not breach Switzerland’s strict privacy laws. There are provisions in within the law which can allow for the transfer of names in specific cases of tax evasion, and while this agreement is larger than that which has been seen previously, it will be made within the bounds of the those laws.

The news comes with a sigh of relief to UBS who paid US$780 million and handed over 250 client names in February. UBS is scheduled to publish their three month financial results soon, which are expected to show a US$1 billion loss. Any further loss in clients or potential deterioration of image would not see this improve in the future. UBS shares rose 5.8% upon release of the news.

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