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The Swiss government has announced that it has examined the dossiers of over four thousand UBS clients suspected of committing tax evasion offences in the United States, but they have only transmitted their findings to the US authorities for around half of the examined cases.

Under the terms of the administrative agreement agreed between Switzerland and the US in August 2009, criteria were established for proceeding with an administrative assistance request submitted by the Internal Revenue Service. This included a requirement that the Swiss Federal Tax Authority examines 4,450 UBS client dossiers and issue decisions in respect of releasing each dossier before the agreed deadline of 26th August 2010.

Procedural delays arising from a court decision in January 2010, which concluded that the agreement between the Swiss and US authorities was illegal, hampered the FTA’s process, and in an attempt to head of the threat of a John Doe summons brought against UBS the Swiss government are now aiming to finalise the outstanding decisions before the year end.

Within Switzerland the controversy over the decision to cooperate with the US tax authorities, and the subsequent Parliamentary vote over-ruling the January court ruling, continues to divide opinion, with many people fearing that this case, the largest client information sharing exercise with a foreign tax authority, has caused irreparable harm to Switzerland’s legendary banking secrecy. We’d like to think so, but only time will tell confirm whether banking secrecy is a thing of the past.

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Originally published on the Tax Justice Network blog.

For more on this story, check out 60 Minutes’ article on the case here…

ZURICH — A Swiss court Monday said it backed a U.S.-Swiss deal governing the handover of thousands of pages of confidential data on clients of UBS AG (UBS) to U.S. tax officials as “binding,” rejecting an appeal by a client of the Swiss bank in a test case.

The decision translates to a final stamp of approval from Swiss authorities, who ultimately clinched parliamentary approval last month for an August 2009 settlement between the U.S. and Switzerland to hand over data on roughly 4,450 alleged tax offenders with hidden Swiss offshore accounts

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“This report looks at deposits held offshore by private entities on a country-by-country basis, achieving a level of specificity previously unavailable to the public,” explained GFI director Raymond Baker. “With overall deposits in secrecy jurisdictions currently approaching US$10 trillion, this report measures a sizable chunk of global wealth and helps us to better understand where individuals and corporations are putting their money.”

Privately Held, Non-Resident Deposits in Secrecy Jurisdictions analyzes data from the Bank of International Settlements and the International Monetary Fund to measure total deposits by non-residents in areas considered secrecy jurisdictions under the definition established by the Tax Justice Network.

Notable report findings include:

• Total Current total deposits by non-residents in offshore centers and secrecy jurisdictions are just under US$10 trillion;
• The United States, the United Kingdom, and the Cayman Islands top the list of jurisdictions, with the United States out in front with more than US$2 trillion in non-resident, privately held deposits in the most recent quarter for which data are available (June 2009);
• Contrary to expectations of perceived favorability for deposits, Asia accounts for only 6 percent of worldwide offshore deposits, although Hong Kong is the tenth most popular secrecy jurisdiction by deposits in this report;
• The rate of growth of offshore deposits in secrecy jurisdictions has expanded at an average of 9 percent per annum since the early 1990s, significantly outpacing the rise of world wealth in the last decade. The gap between these two growth rates may be attributed to increases in illicit financial flows from developing countries and tax evasion by residents of developed countries.

The report also contains two case studies of Switzerland and Iceland, which show measurable fluctuations in financial deposits correlated to events in which financial secrecy or overall market solvency were threatened.

“This report shows that offshore deposits are on the rise, and the quantities of money being sent into these jurisdictions are massive,” said Mr. Baker. “The report also helps us to better understand where reporting may be improved to better differentiate between licit deposits and illicit deposits, which will ultimately enable better law enforcement in cases of tax evasion and other financial crimes.”

Privately Held, Non-Resident Deposits in Secrecy Jurisdictions is the second report by GFI economist Ann Hollingshead. Her earlier report, Implied Tax Revenue Loss from Trade Mispricing, was released last month. For copies of either report please visit www.gfip.org or contact Monique Perry Danziger at 202-293-0740 to request a copy or schedule an interview.

“The Ticino lawyer Fabrizio Pessina, from Chiasso, was arrested at Malpensa airport (Milan) on March 2 on his return from Spain where he had been playing golf. The financial brigade was interested in him, in the context of an investigation into two Italian businessmen suspected of diverting funds from a real estate project in Milan. On Fabrizio Pessina’s personal computers the investigators found, it seems by chance, a list of 552 Italian taxpayers with the details of their bank accounts, including the names of their offshore companies registered in Switzerland, Gibraltar, Liechtenstein and in the British Virgin Islands. The 552 accounts involve 1.2 billion Euros under management.”

Le Temps adds that:

“A second list, whose origin hasn’t been clearly established but whose details have appeared in the press, involves 200 clients of the Italian subsidiary of UBS. . . involving around one billion Euros”

According to the Italian press, which has been largely ignored in publicising this, Le Temps adds, these lists involve “top-rank” officials. Italy has just passed a controversial tax amnesty, a kind of get out of jail free card for criminal tax evaders, which the Italian opposition rightly notes will benefit organised crime and will make tax evasion worse in future.

WASHINGTON – Roberto Cittadini of Bellevue, Wash., pleaded guilty today to filing a false tax return, the Justice Department and Internal Revenue Service (IRS) announced. Cittadini appeared today before Magistrate Judge Mary Alice Theiler in Seattle and accepted responsibility for concealing nearly $2 million in Swiss bank accounts. According to court documents and statements made in court, Cittadini, a retired sales manager for Boeing, failed to report income from bank accounts under his control at UBS AG in Switzerland on his individual income tax returns from 2001 through 2003. Additionally, Cittadini failed to file a Report of Foreign Bank and Financial Accounts (F-BAR) for each of these years.

According to court documents and statements made in court, Cittadini initially opened an account with UBS in the early 1990s in his own name. In approximately 2001, Swiss banker Hansruedi Schumaker, who was indicted in August 2009 for conspiring to defraud the United States, assisted Cittadini in transferring the assets from his UBS account to an account held in the name Mataropa Finance Limited, a nominee Hong Kong corporation. Cittadini transferred his assets to the Hong Kong entity to evade U.S. reporting and withholding requirements. Additionally, Swiss lawyer Matthias W. Rickenbach, who also was indicted in August 2009, acted as the director of the Hong Kong nominee corporation. From 2001 through 2003, Cittadini held as much as $1.86 million in assets in the Mataropa Finance Limited account at UBS in Switzerland.

Magistrate Judge Theiler scheduled sentencing for Jan. 8, 2010. Cittadini faces a maximum sentence of three years in prison and a maximum fine of $250,000. Additionally, Cittadini agreed to pay a civil F-BAR penalty based on 50 percent of the highest account balance from 2001 to 2007.

“Today’s guilty plea in Washington state follows guilty pleas in New Jersey, California and Florida,” said John A DiCicco, Acting Assistant Attorney General of the Justice Department’s Tax Division. “Individuals all over the country who are hiding income and assets in offshore accounts would be well-advised to promptly come in and come clean before the government learns about their accounts through other channels.”

“This is a time of reckoning for those who thought they had found a safe haven for cheating,” said United States Attorney Jenny A. Durkan. “People who avoid paying their fair share hurt all of us who follow the law and conscientiously pay our taxes.”

“The IRS continues its pursuit of those hiding their income and assets in offshore accounts,” said IRS Chief Criminal Investigation, Eileen Mayer. “People must meet their filing requirements and pay the taxes they owe, or they face potential criminal prosecution. We encourage people who have been hiding money offshore to come forward by Oct. 15 to take advantage of the special provisions in our voluntary disclosure effort.”

In February 2009, UBS entered into a deferred prosecution agreement in which the bank admitted to helping U.S. taxpayers hide accounts from the IRS. As part of their agreement, UBS provided the United States government with the identities of, and account information for, certain U.S. customers of UBS’s cross-border business.

In June 2009, UBS client Steven Michael Rubinstein, a Boca Raton, Fla., accountant, pleaded guilty to filing a false tax return. In April 2009, another UBS client, Robert Moran, a Ft. Lauderdale, Fla., yacht broker, pleaded guilty to filing a false tax return. In July 2009, UBS client Jeffrey Chernick, of Stanfordville, N.Y., pleaded guilty to filing a false tax return. In August 2009, UBS client John McCarthy, a resident of Malibu, Calif., agreed to plead guilty to failing to report his ownership of and interest in a foreign financial account. In September 2009, UBS client Juergenn Homann of Saddle River, N.J. pleaded guilty to failure to file a F-BAR.

Acting Assistant Attorney General DiCicco and U.S. Attorney Durkan commended the IRS agents who investigated the case, as well as Trial Attorney Michael J. Watling of the Tax Division who is prosecuting the case.

United States citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, American citizens much file an F-BAR with the U.S. Treasury, disclosing any financial account in a foreign country with assets in excess of $10,000 for which they have a financial interest in or signature authority, or other authority over.

More information about the Justice Department’s Tax Division and its enforcement efforts is available at http://www.usdoj.gov/tax/.

In court filings, federal prosecutors accused Mr. Homann of deliberately failing to submit a form known as an F-bar in 2007 disclosing his UBS accounts and of using a foundation in Liechtenstein, a noted tax haven, to conceal the trail. The filings said that Mr. Homann concealed $5 million from United States tax authorities by shifting that amount from his UBS account to a sham corporation, ELM Finance, set up in Hong Kong in 2005.

The court papers did not identify Mr. Homann’s private banker at UBS.

But they said that Mr. Homann worked with a Swiss lawyer, Matthias Rickenbach, to set up sham corporations overseas to funnel his UBS money to accounts he could then access without alerting the Internal Revenue Service.

Sounds about par for the course.  This is why we need transparency in the international financial system.  He couldn’t do this sort of thing if disclosure of the beneficial ownership of corporations were required.  Or if the automatic exchange of tax information occurred between countries.

A wealthy UBS private banking client who owns a building material company in New Jersey pleaded guilty on Friday to tax evasion, the fourth American caught in a widening investigation into the giant Swiss bank over its offshore services.

Juergen Homann, 66, of Saddle River, N.J., pleaded guilty in Federal District Court in Newark to one count of failing to file a special tax form disclosing the foreign assets.

Continue reading at NYTimes.com…

Swiss banks proposed a withholding tax for foreign clients as they bid to fend off attacks on banking secrecy by the U.S., Germany and France.

The tax on the interest, dividends, capital gains and investment income could raise “billions per year” for foreign governments, Urs Roth, chief executive officer of the Swiss Bankers Association, said in an interview in Zurich today. The proposal would extend a tax on interest income already assessed on Swiss residents and some European Union citizens.

Continue reading at Bloomberg.com…

ZURICH–UBS AG’s (UBS) organizational and operational restructuring is on track, but the Swiss bank’s efforts to renew client trust will require long and hard work, Chief Executive Oswald Gruebel warned.

In a memo sent Tuesday to the bank’s more than 70,000 staff, Gruebel said that “returning the to profitability will only be the beginning.” He warned that “the recovery of our reputation will require hard work and relentless effort.”

Continue reading at WSJ.com…