US targets UBS over 'secret accounts'


US targets UBS over 'secret accounts'
The US government is targeting UBS over allegations the Swiss bank helped wealthy Americans avoid paying tax on $20 billion (£10 billion) held in secret accounts.

The justice department has filed a request at a federal court in Miami, Florida seeking permission for the Internal Revenue Service (IRS) to demand information from UBS about US taxpayers who hold accounts at the bank.

The 'John Doe' summons – a way of getting information about US taxpayers whose identities are unknown – was triggered by the trial of former UBS banker Bradley Birkenfeld in June this year.

Mr Birkenfeld pleaded guilty to conspiring to defraud the IRS by assisting UBS clients in avoiding US reporting requirements on income in Swiss bank accounts.

According to Birkenfeld's court statement, UBS employees assisted wealthy US clients in concealing their ownership of assets held offshore by creating sham entities and then filing IRS forms falsely claiming that the entities were the owners of the accounts.

Mr Birkenfeld claims UBS had approximately $20 billion (£10 billion) of assets under management in 'undeclared' accounts for US taxpayers.

Under US law, taxpayers must declare all financial accounts in a foreign country if the total value of the accounts exceeds $10,000 (£5,000) at any time during the calendar year.

If caught evading tax, the IRS can take up to half of the amount in the account as a penalty.

"Offshore accounts harbour billions of dollars, and people should take notice that the secrecy surrounding these deals is rapidly fading," said IRS commissioner Doug Shulman.

"The information we gather from this action will help us detect wealthy individuals who don't pay their taxes as well as provide details about how advisors facilitate this abuse."

UBS was the worst affected European bank by the credit crisis and has lost billions from investments in the subprime market.

The bank launched an internal investigation into the crisis and, under pressure form shareholders, has today announced the resignation of four board members.

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