The business was so small it was initially below the radar screen of Swiss financial regulator FINMA, at the time known as the Federal Banking Commission. They added up to almost $20 billion, or less than 1 percent of UBS’s total invested assets of about $2 trillion (2.174 trillion Swiss francs) at the end of 2008. The cross-border accounts were hardly a big part of the bank’s business. But UBS bankers, seemingly unaware of the legal consequences, made 3,800 trips to the United States to visit these clients in 2004 alone. The business was referred to by some UBS executives as “toxic waste” due to the risks it carried under U.S. According to settlement documents, UBS sometimes used shell financial entities to hide the money, depriving the Internal Revenue Service of hundreds of millions of dollars of tax revenues. In documents relating to the UBS case, the DOJ said the bank helped some 52,000 Americans hide billions of dollars of untaxed assets in secret Swiss accounts between 20. It operated out of Switzerland and was separate from UBS’s New York-based Americas wealth management business. This consisted of wealth management services offered to American residents outside the United States.
Under scrutiny by the DOJ was the so-called U.S. Doing so might also shatter wealthy clients’ trust in the bank - and in the whole Swiss financial center. Sharing bank client data would have been against UBS’s core principles: confidence, security and discretion, symbolized by the three keys of its 70-year-old logo. SWISS SECRETSįor UBS and other Swiss banks, the implications of the New York meeting on Octowere hardly trivial. In the months ahead, UBS’s new management team will try to stabilize its battered wealth management division, whose advisers have been bolting and taking clients with them.Īll of this in turn has forced the bank to confront a broader, more existential question: what exactly is UBS today? An asset-gathering megabank or a leaner player, more attentive to its wealthy clients’ needs. And while the bank ultimately defused the situation by coughing up $780 million and agreeing to hand over some client names, the damage to its huge and increasingly important wealth management operation still weighs heavily on the Swiss banking flagship. The confrontation also pushed UBS closer to the brink than is commonly realized. Interviews with insiders and a review of documents reveal previously undisclosed details about how the sprawling tax case was resolved - at several points in the process, for example, Secretary of State Hillary Clinton was involved. “It became crystal clear at that meeting that without addressing the issue of client names, no settlement could be found.”
“UBS was already in a position of weakness from the credit crisis,” said one person who attended the meeting and spoke to Reuters on condition of anonymity. That put UBS in the nightmarish position of either breaching nearly a century of Swiss bank secrecy or risking indictment in the United States. tax evaders as a condition for a settlement. Department of Justice Tax Division Attorney who had been investigating UBS since the middle of 2008, chose that meeting to drop a bombshell: he wanted the bank to disclose names of U.S. The plan was simple: admit guilt, settle the case quickly and move on.īut Kevin Downing, the U.S. The UBS delegation, led by newly-appointed Group General Counsel Markus Diethelm, arrived armed with the results of an internal report highlighting instances of tax fraud within the bank, insiders told Reuters. officials who were conducting a wide-ranging tax fraud investigation that centered on the bank.
One day after the bailout, top executives from UBS and Swiss regulators were summoned to a closed-door meeting in New York by U.S. But unbeknownst to them at the time, the bank faced a potentially devastating crisis on a very different front. Investors the world over breathed a sigh of relief on October 16 when the Swiss government rescued UBS. The logo of Swiss bank UBS is seen at the company's office at the Bahnhofstrasse in Zurich in this Jfile photo.