Swiss bank UBS fined $1.5 bln for Libor fraud

UBS has been fined $1.5 billion by British, Swiss and
US regulators to settle charges of manipulating global
benchmark interest rates. REUTERS photo

GENEVA - The Associated Press

Switzerland’s UBS AG agrees to pay a $1.5 billion fine to international regulators following a probe into the rigging of a key global interest rate

Swiss banking giant UBS AG admitted yesterday to fraud and agreed to pay some $1.5 billion to U.S., British and Swiss authorities in a probe into the rigging of global benchmark interest rates.

The settlement caps a tough year for Switzerland’s biggest bank, which is one of several leading banks that has been under investigation over allegations of manipulating the benchmark LIBOR interest rate, short for London interbank offered rate. It is used to set the interest rates on trillions of dollars in contracts around the world, including mortgages and credit cards.

The rate is a self-policing system and relies on information that global banks submit to a British banking authority. American and British regulators have already fined Britain’s Barclays $453 million for submitting false information between 2005 and 2009 to keep the interest rate low.

UBS said some of its employees tried to rig the LIBOR rate in several currencies, but that its Japan unit, where much of the manipulation took place, entered a plea to one count of wire fraud in a the proposed agreement with the U.S. Justice Department.

The statement from the UBS board of directors said some of its personnel had “engaged in efforts to manipulate submissions for certain benchmark rates to benefit trading positions.”

‘Misconduct did not reflect bank’s values’

The bank also said some of its employees had “colluded with employees at other banks and cash brokers to influence certain benchmark rates to benefit their trading positions” or had given “inappropriate directions to UBS submitters that were in part motivated by a desire to avoid unfair and negative market and media perceptions during the financial crisis.”

Sergio Ermotti, who was appointed chief executive officer of UBS AG in November 2012 in the wake of a major trading scandal, said in the statement that the misconduct did not reflect the bank’s values or standards.

“We deeply regret this inappropriate and unethical behavior. No amount of profit is more important than the reputation of the firm, and we are committed to doing business with integrity,” he said.

With more than $2.4 trillion in invested assets, Zurich-based UBS is one of the world’s largest managers of private wealth assets. At last count, the bank had 63,745 employees in 57 countries but said it aimed for a headcount of 54,000 in 2015. Along with Credit Suisse, the second-largest Swiss bank, UBS is on the list of the 29 “global systemically important banks” that the Basel, Switzerland-based Bank for International Settlements, the central bank for central banks, considers too big to fail.

In 2008, UBS was forced to seek a bailout from the Swiss government when it was hard hit by the financial crisis and its fixed-income unit had more than $50 billion in losses. U.S. authorities fined UBS $780 million in 2009 for helping U.S. citizens avoid paying taxes.

The U.S. government has since been pushing Switzerland to loosen its rules on banking secrecy and has been trying to shed its image as a tax haven, signing deals with the United States, Germany and Britain to provide greater assistance to foreign tax authorities seeking information on their citizens’ accounts.

 

Swiss banks face more pressure after German setback

By Katharina Bart

ZURICH | Fri Dec 14, 2012 2:39pm GMT

(Reuters) - Switzerland's banks have suffered a major setback in their fight to maintain client secrecy after Germany rejected a key tax pact to sweep Swiss accounts clean of tax dodgers.
Switzerland is trying to protect its $2 trillion (1.23 trillion pounds) offshore banking industry by striking deals with European neighbours that allow their citizens to pay tax on secret Swiss accounts without revealing their identity.

The German deal's failure -- even as others with Britain and Austria go ahead -- is a big blow to the Swiss government because the northern neighbour has traditionally been the biggest foreign market for Swiss private banks, which hold an estimated 150 billion Swiss francs ($161 billion) in German assets.

"Switzerland still hasn't solved the problems of its past, which means it should put together a Plan 'B' as quickly as possible," said Heiko Kubaile, partner at KPMG in Zurich and head of German tax and legal.

Swiss officials are struggling to reconcile strict national laws protecting banking secrecy with intense international pressure to get at lost tax revenue.

Switzerland remains embroiled in a long-simmering tax dispute with the United States targeting Credit Suisse (CSGN.VX) and a host of other banks suspected of helping clients dodge U.S. taxes.

Switzerland has agreed to allow foreign governments to get information on groups of bank clients based on suspicious behavioural patterns, such as using a bank-provided mobile phone, bringing itself into line with standards laid out by the Organisation for Economic Cooperation and Development on group requests.

But that isn't likely to stop influential European neighbours like France and Germany from doing everything in their power -- including purchasing leaked bank data -- to claw back tax income.

"International pressure will increase, and I say this without any ridicule, malice or an excursion into Western movies," said Germany's Peer Steinbrueck, the opposition Social Democrats' (SPD) candidate for German chancellor in next year's elections.

Steinbrueck famously referred to the Swiss as Indians running from the cavalry when he cracked down hard on bank secrecy as finance minister in Merkel's 2005-09 "grand coalition" government.

Switzerland is sticking with the withholding tax model to clean up its past, finance minister Eveline Widmer-Schlumpf said this week.

"We don't have another short-term option that conforms with the laws of our country to let the past be the past," Widmer-Schlumpf told Swiss television.

In saying so, she implicitly rejected again an automatic exchange of information, which is commonplace in parts of the European Union though some member states are resisting it.

Experts say the automatic option is a less attractive one because it means more work for cash-strapped foreign governments, many of which had hoped to fill budget holes quickly with advance payments from Switzerland.

A recent study by the European Policy Forum, a London-based think tank, argues that an outright exchange of information on taxing savings hasn't worked within the EU because data cannot be effectively used by fiscal authorities.

By contrast, Swiss upfront payments from withholding tax deals have allowed Britain's finance minister to say he expects to take in 5 billion pounds ($8.1 billion) over the next six years through the deal, part of an effort to counter a shortfall in tax revenue caused by economic weakness.

Germany is forfeiting 2 billion Swiss francs in upfront payments from Switzerland as a result of rejecting the deal.

Now, Switzerland faces scrutiny on how it deals with foreign pressure, and in particular how it puts the group request rules, laid by the OECD, into place.

NO WAY OUT
Swiss banks are suffering heavy outflows in Europe due to the tax pressure, though bigger players are countering the withdrawals with inflows from Asia, the Middle East and South America.

UBS has said it could see withdrawals of 12-30 billion francs from total European assets under management of over 300 billion, while Credit Suisse put its own outflows at up to 35 billion francs in coming years.

UBS has already taken steps: earlier this month, the bank said it will cut up to 35 German jobs when it closes branches in Dortmund, Essen, Rosenheim and Wiesbaden, part of efforts to bolster profitability.

The German deal's failure means there increasingly is no way out for wealthy Germans who are hiding money in Switzerland.

"Taking money elsewhere and continuing to hide is an illusion. Very few clients will choose that route for their money," said Hans-Joachim Jaeger, Zurich-based tax expert with Ernst & Young.

German officials are preparing for a flood of wealthy Germans -- who had held out the hope a withholding tax deal would regulate their undeclared assets -- to turn themselves in.

A flourishing trade in leaked bank client data to get at the names of alleged tax dodgers -- which has become commonplace in recent months -- is also likely to continue.

Switzerland is slated to unveil specifics of a clean money strategy to sweep undeclared assets out of the country, which could include beefed-up client disclosure requirements by banks.

(Additional reporting by Oliver Hirt; Editing by Carmel Crimmins.)

German-Swiss tax deal sinks at last-ditch meeting

Happier times: Eveline Widmer-Schlumpf after signing the German-Swiss tax deal with German Finance Minister Wolfgang Schäuble last year (Keystone)

 

 

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Representatives from both chambers of Germany’s parliament have failed to reach an agreement on a German-Swiss tax accord, effectively ending any chance of ratification after the opposition refused to review its position.

A mediation committee met on Wednesday to seek a compromise that would have allowed the accord  aimed at legalising undeclared assets held by Germans in Swiss banks to take effect next month.

Late in November, the centre-left German Social Democrats and Greens effectively blocked the deal by voting against the agreement in the Senate where they hold the majority, claiming notably the accord had too many loopholes and let off those who had failed to pay their taxes too easily.

The lower house of the German parliament, where Chancellor Angela Merkel’s coalition has the majority, approved the deal in October.

"We regret that Germany has not ratified the withholding tax agreement signed between Switzerland and Germany,” said Swiss President Eveline Widmer-Schlumpf after the decision.

In a statement, the State Secretariat for International Financial Matters said the status quo with Germany was less than satisfactory, with Switzerland’s northern neighbour relying on CDs containing data acquired illegally and then requesting administrative assistance to track down tax evaders.

It also pointed out that Germany would be losing money as a large share of outstanding tax would be subject to the statute of limitations.

The accord would have imposed a retroactive levy of up to 41 per cent on capital in offshore bank accounts held by Germans, imposed a tax on future interest income, while allowing account holders to remain anonymous.

Revenue from tax arrears under the deal would have been worth €10 billion ($12 billion), plus an additional €700 million annually from withholding tax  according to German government estimates, although the opposition contested the figures.

The Swiss bankers Association said it regretted the accord had been rejected because of “domestic policy reasons in Germany”, adding that deal was “a fair, optimum and sustainable solution to definitively settle bilateral tax issues”.

Political reaction

Switzerland had already approved the tax accord with Germany despite some opposition from the rightwing and left.

The centre-right Radicals said that Germany had missed the opportunity to sign a “good and fair tax deal” with Switzerland. They also demanded that the government stick with its current strategy and not return to the negotiating table with the Germans, or otherwise risk becoming “a pawn in Germany’s electoral debate”.

Widmer-Schlumpf confirmed there would be no further talks concerning the deal, admitting that it was dead and adding there was nothing left to discuss. She did not rule out fresh talks at a later date, but not in the next 12 months.

“We are neighbours, so we have to find solutions,” she added.

The centre-left Social Democrats said on the other hand that the rejection of the deal was proof that allowing account holders to remain anonymous while imposing a withholding tax was “a dead end”.

They called on the cabinet to consider the automatic exchange of bank data, which could provide a definitive solution to the various disputes with other countries over banking secrecy.

The rightwing Swiss People’s Party, which had not been in favour of the accord, was not unhappy about the outcome. Its secretary-general Martin Baltisser said nothing had changed for Switzerland, and that Germany would be able to continue requesting administrative assistance.

swissinfo.ch and agencies

Switzerland Amends Banking Law To Expose Illicit Accounts

Published On: Tue, Dec 11th, 2012

Breaking News / Current / Headlines | By Channels Television  

 

The Switzerland Ambassador to Nigeria, Hans-Rudolf Hodel on Tuesday said his country has amended its bank secrecy laws making it more legally responsible to disclose suspicious funds lodged in the country’s financial institutions.

Mr Hodel, who was speaking at a seminar in Abuja on money laundering and terrorism in West Africa, said with the rise in the financing of global terrorism, individuals and groups can no longer loot money and dump in Swiss accounts without fear of discovery as the authorities are now authorised to raise alerts on suspicious transactions.

“We still have a bank secrecy law but it is very relative because as soon as there are suspicions of illicit fund be it for trafficking, terrorism or whatever criminal act, the bank secrecy is lifted and the accounts are seized,” the Ambassador said.

Mr Hodel said Switzerland is currently engaged in activities that will strengthen regional capacity and cooperation in dealing with the financing of terrorist groups.

Other experts present at the event pointed out that the quickest way to kill terrorism is to cut off its life source which is funding.

Bank secrecy is a legal principle under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply (for example, a criminal complaint has been filed).

Created by the Swiss Banking Act of 1934, which led to the famous Swiss bank, the principle of bank secrecy is always considered one of the main aspects of private banking. It has also been accused by civil society organisations and governments of being one of the main instruments of underground economy and organized crime.

Former bank employees from banks in Switzerland (UBS, Julius Baer) and Liechtenstein (LGT Group) have testified that their former institutions helped clients evade billions of dollars in taxes by routing money through offshore havens in the Caribbean and Switzerland. One of these, Rudolf Elmer, wrote in the New York Times, “It is a global problem…Offshore tax evasion is the biggest theft among societies and neighbour states in this world.”

The Swiss Parliament ratified on June 17, 2010 an agreement between the Swiss and the United States governments allowing UBS to transmit to the US authorities information concerning 4,450 American clients of UBS suspected of tax evasion.

Hollande rules out tax amnesty with Swiss

Puzzled: Eveline Widmer-Schlumpf failed to convince François Hollande of the Rubik accords (Keystone)

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swissinfo.ch and agencies

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There will be no fiscal amnesty as part of any agreement on banking secrecy with Switzerland, said French President François Hollande on Friday after meeting Swiss Finance Minister Eveline Widmer-Schlumpf.

Switzerland had wanted – via a so-called Rubik accord – to regulate the previously non-declared, untaxed funds deposited by foreign nationals in Switzerland while preserving client anonymity.

“There cannot be a tax amnesty,” declared Hollande at a press conference in Paris.

For her part, Widmer-Schlumpf, who also holds the rotating Swiss presidency this year, said the Rubik accords were not so much an amnesty as a compromise “which allows tax payers with accounts in Switzerland to be taxed with a fine”.

Hollande said France wished to make progress on other issues – such as cooperation in the search for tax information, the status of the binational airport at Basel or the agreement on inheritance – before dealing with the Rubik dossier.

Beyond tax matters, Hollande said one of the reasons for the meeting was to strengthen bilateral relations which had been damaged by arguments over banking secrecy going back to his predecessor, Nicolas Sarkozy.

The Swiss government, according to Hollande, had been “needlessly shocked or attacked by surprise by the previous presidency”.

He also jokingly denied rumours that French tax agents were pretending to take holidays in Switzerland in order to check up on French tax payers.

A Swiss finance ministry spokesperson said Hollande had agreed to visit Switzerland "in the coming months", although no date had been set.

Pressure

Switzerland has come under increased pressure to hand over names of alleged tax cheats from countries such as Germany, France, Italy and Britain.

In response, the Rubik principle was devised by the Association of Foreign Banks in Switzerland, and aims to separate income from wealth and hand over tax at source to third countries, while keeping the Swiss bank account holder’s anonymity.

Rubik deals have been signed with Austria, Germany and Britain but are subject to parliamentary approval in all the countries involved. Last month, the German upper house of parliament, dominated by opposition parties, the deal.

swissinfo.ch and agencies

£40bn held in Swiss bank accounts by UK taxpayers

 

5 December 2012 Last updated at 17:19 GMT

An estimated £40bn is being held in Swiss bank accounts by UK taxpayers.

The estimate, the first to be published, is contained in the documents accompanying the Autumn Statement.
A breakthrough tax agreement with the Swiss government comes into force on 1 January 2013.

It is hoped that this will flush out £5.3bn in extra tax over the next six years, from UK citizens who have been hiding money in Swiss bank accounts.

"I am staggered at the sums, it is a huge amount of money, absolutely enormous," said Ronnie Ludwig at accountants Saffery Champness.

"It makes me wonder how much is stashed away in other tax havens."
'Significant step forward'
The deal with the Swiss government was first struck in August 2011.

The country has, until recently, been one of the world's top tax havens with a long tradition of total secrecy for its banks' customers.

This has crumbled under international pressure in the past two years.

The UK's deal will see the Swiss government make a payment of half a billion Swiss francs, to cover past unpaid taxes due to the UK.

"This is the largest tax evasion settlement in UK history, marking a significant step forward in the battle against those who seek to evade UK tax," said the Treasury.

In addition, on behalf of the UK tax authorities, the Swiss government will collect:

• A one-off levy on existing Swiss assets owned by UK residents, worth between 21% and 41% of the assets

• A withholding tax on future income and gains, at rates ranging from 27% to 43%

• A 40% per cent inheritance tax on Swiss assets for UK investors.

The UK government admits it may not be able to pin down who, exactly, owns all the money in Swiss banks, and also expects some of the assets to be moved.

So it thinks the amount that will be taxed will in fact be £25bn.

"An adjustment has also been made to account for identification failure," the Treasury admits.

There is, however, a word of warning: the deal may require a referendum of the Swiss people to ratify it.
"The final stage of the ratification process is expected to be concluded shortly, but there remains a possibility that the Swiss government will have to hold a referendum on the agreement," says the Treasury.
"This is therefore a significant fiscal risk to the forecast."

The Treasury also added: "The estimated revenue raised by this measure is also highly uncertain as there is little hard information about the value of UK individuals' financial assets in Switzerland, and how these individuals will respond to the policy."