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UBS to reveal 4,450 accounts to US

By AFP

Troubled UBS is set to disclose details of 4,450 accounts to US authorities as part of a settlement of potentially damaging tax fraud charges against the Swiss bank, US and Swiss governments said Wednesday.

In a lawsuit earlier this year, US authorities had accused the Swiss bank of "systematically and deliberately" violating American laws by promoting offshore accounts for American citizens, targeting up to 52,000 US clients.

Switzerland and the United States, however, concluded an agreement to end the litigation in a US court and appeared to sharply reduce the scale of the tax fraud charges that had threatened to deliver a severe blow to Swiss banking secrecy.

UBS said Wednesday it had also reached a parallel out-of-court settlement with US tax authorities that averted a financial penalty for the bank.

"This agreement helps resolve one of UBS?s most pressing issues," said UBS chairman Kaspar Villiger, who is still grappling with huge losses caused by the global financial crisis.

The Swiss government said in a statement after a meeting here: "The agreement between Switzerland and the United States has entered into force."

In return for a decision by US authorities to drop their lawsuit against UBS, Switzerland agreed "to process within one year with a new request for administrative assistance relating to some 4,450 accounts," it added.

However, the agreement also maintains the threat of legal action in the United States regarding undisclosed accounts until "anticipated or actual delivery" in August 2010, according to UBS.

"The affair is far from settled, its application is extremely complex," Swiss Justice Minister Eveline Widmer-Schlumpf told journalists.

The agreement also "states that the United States will refrain from unilateral information-gathering measures that infringe Switzerland's sovereignty and rule of law," according to the Swiss government.

Meanwhile, US justice and tax authorities said they would still receive "substantially" the information that they were seeking by agreeing to follow the procedure under US-Swiss dual taxation arrangements.

UBS said its parallel out-of-court settlement with the US Internal Revenue Service "does not call for any payment" by the bank.

"It resolves all issues relating to the alleged breaches" set out in the case by the IRS, the bank added.

Attorneys announced on August 12 that the two sides had initialed a deal but the details were only revealed on Wednesday.

The litigation over 52,000 names in the United States, which followed a 780 million dollar (587 million euros) fine on UBS in a similar tax-related case in February, has weighed on the bank's recovery from the global financial crisis.

It also threatened to deliver a severe blow to Switzerland's highly prized but also internationally-criticised banking secrecy.

The Swiss government had warned that UBS would be obliged to break Swiss law if it met the US demands.

UBS reported a net loss of 1.4 billion Swiss francs (916 million euros, 1.32 billion dollars) for the second quarter of 2009 and warned that it needed more time to return to profitability.

The Zurich-based bank, one of the biggest losers in the global financial crisis, has also been struggling to keep customers on board. They withdrew assets amounting to 39.5 billion Swiss francs in the second quarter alone.

Under the agreement revealed Wednesday, UBS said it would also write to "affected US persons," encouraging them to voluntarily disclose their accounts to US tax authorities.

"I am confident that the agreement will allow the bank to continue moving forward to rebuild its reputation through solid performance and client service," said Villiger.

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