ALL FINANCIAL FOREX NEWS on ONE PAGE » Switzerland

Switzerland Caves In To IRS Demands – US-FOREX.US

Forex-Publisher — Thu, 20 Aug 2009 03:14:32 +0000

To assist the U.S. government Switzerland has lifted its veil of secrecy and has agreed to give 4,450 banking client names to the Internal Revenue Service. The international crackdown on tax evasion has been gaining ever more momentum as governments, smarting from the economic crisis, seek to claw back as much revenue as they can. As a result, Swiss banking is crumbling and Switzerland’s reputation for financial discretion is suffering as well.The agreement between Switzerland and the United States announced on Wednesday could set a precedent for American authorities to go after more names, from more Swiss banks. Until now, Switzerland has, like other tax haven countries, only shared banking records with foreign law enforcement agencies if they’re investigating an action that would be considered criminal under Swiss law. Switzerland hasn’t changed any of its laws but has changed its interpretation of existing laws that cover “tax fraud and the like.” It won’t be known how far-reaching this precedent will be for another 90 days; Swiss and U.S. authorities are keeping some of it secret because the IRS is hoping that U.S. depositors in tax haven nations will come clean on their own.In its essence, Wednesday’s deal came from a diplomatic dance that saw Switzerland agree to reinterpret what it classed as tax evasion. It allows UBS
to give up account information requested by the IRS to the Swiss Financial Tax Administration to then release to the IRS, without breaking Swiss law. The newly tailored agreement is based on terms of a double-taxation agreement that has existed between the United States and Switzerland since 1996 but which on its own has done little to help the IRS identify tax evaders. Now clauses in the new agreement could allow the IRS go against other Swiss banks if they can assemble similar sorts of information to request of the Swiss government. “There are further avenues for the DOJ and IRS to pursue,” said Richard Murphy of the British tax consultancy Tax Research. Both Switzerland’s and UBS’ reputation for banking secrecy has already been permanently scarred. But confirmation that the IRS will get names from UBS will compel a flood of more wealthy individuals who have Swiss bank accounts to come forward to meet the voluntary disclosure deadline set by the IRS of Sept. 23, a date agency announced on Wednesday. Those who fess up after that deadline will face harsher penalties. Many offshore banking clients have until now been in wait-and-see mode for the outcome of the UBS case. Robert McKenzie, a partner at law firm Arnstein & Lehr and former officer with the IRS Collection Division, is currently advising approximately 50 such clients on the IRS disclosure issue-some are not clients of UBS but of other offshore banks and are concerned about the impact of the Swiss bank’s case.
Yet around 15 of them have wanted to wait for Wednesday’s final announcement. Unbelievably, there was hope that UBS might actually win its case against the IRS. McKenzie says a recurring comment among lawyer circles is that a surprising number of clients have been procrastinating on disclosure. Waiting seems to be a mistake, since UBS will notify only 500 clients within the next 90 days that their account details will be given to the IRS-most UBS clients will still be in the dark on Wednesday about whether they are one of the 4,450. “What happens if the IRS serves Credit Suisse
next,” said McKenzie, “and tells it to give us the clients that meet this criteria meet with Swiss government, and you’re past the Sept, 23 deadline?” Cue harsher penalties. UBS account holders will be allowed to appeal the decision to disclose their names in court, but three sources consulted by Forbes, including one at UBS, suggested that most of these appeals would be unsuccessful. Swiss banking clients may think that the best thing to do is consult their tax advisor, but that’s where things could also get complicated. “Every time I bring a person into the IRS for voluntary disclosure-let’s take a client with a Cayman Islands account-I have to give them the name of the tax advisor, or the people who advised those clients,” said McKenzie. With more advisors coming forward for voluntary disclosure ahead of the Sept. 23 deadline, the IRS has a growing database of advisors from whom it can request names of all U.S. clients they have assisted in setting up offshore banking accounts or trusts. McKenzie says appeals against such requests will fail-his own attempts to prevent the IRS from disclosing the names of tax clients advised by former accounting firm Arthur Anderson failed in September 2003. The DOJ’s recent statement on California resident John McCarthy, the fourth U.S. citizen to turn himself into the DOJ as a client with a secret bank account with UBS, also raises questions about people who have advised clients with such accounts. The DOJ’s statement on McCarthy says that UBS “worked closely with his Swiss lawyer to keep McCarthy’s funds from leaving Switzerland and helped McCarthy move additional monies out of the United States undetected by the federal government.” Assuming that Swiss lawyers who help Americans evade tax services are committing wire offenses, are they subject to extradition proceedings or even arrest if they travel to the United States? “If the U.S. decides to go down that route and make Swiss individuals criminally liable for what they’re doing, that’s going to have a radical impact on practice inside Switzerland itself,” said Murphy. There are currently 929 lawyers listed as financial intermediaries in Switzerland, according to the Swiss Financial Action Task Force.

UBS Likely To Name Names – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 18:47:08 +0000

Some relief at long, long last for UBS. The embattled Swiss bank will no longer be facing a lawsuit demanding that it hand over the details of 52,000 U.S. citizens suspected of tax evasion. Stuart Gibson, a tax attorney for the U.S. Department of Justice said during a conference call on Wednesday that the case would be dropped after a final deal is formally signed, but that the parties have “initialled agreements.” He added that it would “take a little time” for the formal signing. This means the deal is effectively done, says Ken Rubinstein, senior partner at law firm Rubinstein & Rubinstein in New York. “Signing is just a technicality; they are doing the final read through just to be sure.” Neither side has yet revealed the details of their agreement, though it is likely to include a lot of those names being handed over. Rubinstein believes that U.S. authorities would not be satisfied if a majority of the 52,000 weren’t included in the deal.
UBS
struck an agreement “in principle” on July 31 but the stumbling block has proved how the bank could actually hand over the data without breaking Switzerland’s secrecy laws. Switzerland has been very clear that those laws are inviolable and has even threatened to confiscate the data to prevent UBS handing it over. After the July announcement, there was a brief period of concern after the two sides requested more time to settle issues, stoking fears that the discussions could drag on. An agreement can’t come soon enough for UBS, which reported a second quarterly loss of 1.3 billion Swiss francs , last week with a steady outflow of client money adding to the burden of 2.2 billion in write downs. The agreement will provide relief for Switzerland’s entire banking sector, which had been closing watching the dispute: financial advisers based in Switzerland said that several banks had begun shying away from U.S. clients for fear that a similar fate to UBS could befall them.UBS has already handed over the details of some clients in February, following settlement on a separate case, as part of which it had to also make a payment of 780 million. U.S. authorities have pounced on the information swiftly: three U.S. citizens have already pled guilty to tax evasion.
All along UBS has maintained that it has been caught in the middle of a dispute between governments, and should therefore be resolved at that level. Switzerland recently took over the lead role in the negotiations and arlier this week, the Swiss cabinet held a special session to discuss the UBS case. The bank management was “grateful that the two governments reached this agreement to resolve this issue,” Kaspar Villiger, the chairman of UBS said Wednesday. While public opinion and procedure will make altering the country’s secrecy laws nigh on impossible, the most likely move to accommodate the U.S. demands is a tweak to the interpretation to those laws, says Ken Rubinstein, senior partner at Rubinstein & Rubinstein is that Switzerland. This could involve tweaking the Swiss definition of tax fraud to be closer to the U.S. definition, which would allow them to meet the request.

UBS Caught Up In The Issues – US-FOREX.US

Forex-Publisher — Mon, 10 Aug 2009 17:46:20 +0000

You’d think the issue of international tax evasion was big enough to keep government officials talking for a lengthy amount of time. But American and Swiss authorities have a lot more than that to discuss as they seek an agreement over UBS handing over to the U.S.’ Internal Revenue Service the names of several thousand clients who had previously been promised anonymity. Talks between the two governments are reported to have stalled over when and how Switzerland will actually transfer the client account data, which is protected by strict bank secrecy laws. The Swiss cabinet held an extraordinary general meeting over the issue on Monday; the crucial complication is that while tax evasion is illegal in the U.S., breaching confidentiality is illegal in Switzerland. Switzerland has already capitulated by, in theory, allowing UBS
to pass on the names-not surprising given the international pressure to stamp out tax evasion that was amplified at the G20 meeting in London in January. Though the IRS originally wanted UBS to hand over 52,000 client names who were suspected of tax evasion, recent reports say it is more likely that the bank will have to divulge 5,000 or possibly 10,000 names. Even that amount will severely damage UBS’ reputation as a haven for wealthy individuals who want to squirrel their money away from the eyes of American tax authorities. And the change in perception is already clear in the billions of dollars flowing out from its private banking division. But Switzerland also has some cards to play in multilateral discussions, particularly when it comes to foreign affairs. The country’s diplomats, for instance, have been representing U.S. interests in Iran since 1980. They have most recently been playing an important role in trying to find out what happened to three Americans who were reportedly captured in Iran after wandering in from Iraq’s northern Kurdish region. There’s also trade: The U.S. is the main destination for Swiss direct investment, and Swiss exports to the United States totaled close to 19 billion in 2008, according to Swissinfo.net. “It’s not just a tax issue. There are greater complexities in the international relationship other than tax,” said Richard Murphy, a director of the consultancy Tax Research.
Yet, in spite of the pressure to get information from Switzerland, it is probable that the IRS is not pushing the Swiss or UBS to hurry. Murphy points out that around 400 Americans who have bank accounts with UBS have already come forward to the IRS with their account details in one week. The penalty of doing so is smaller than if the IRS pinpoints tax evasion via a full audit, suggesting many of UBS’ private banking clients are facing a prisoner’s dilemma. “The more who can be persuaded to confess, the better,” said Murphy. “It’s cheaper than a full IRS audit, even without the penalties. This is a game of psychology to get the information.”

UBSU.S. Strike Last-Minute Deal – US-FOREX.US

Forex-Publisher — Fri, 31 Jul 2009 19:46:12 +0000

UBS has narrowly avoided a court hearing after reaching an “agreement in principle” with U.S. authorities over a tax conflict that has mired the bank’s road to recovery.The agreement was reached on “major issues” while outstanding issues were expected to be resolved in the coming week, UBS said in a statement on Friday. It follows a telephone conversation between Stuart Gibson, a lawyer representing the U.S. Department of Justice, and Alan Gold, a U.S. district judge in Miami, Fla. Shares of UBS
surged 4.4%, to 15.68 Swiss francs , in Zurich, reflecting investor relief that a two-day hearing meant to commence on Monday was avoided.UBS, the Swiss government and the Department of Justice have been engaged in a public tussle since February, after the IRS demanded that the bank hand over the details of some 52,000 U.S. citizens in an investigation into tax avoidance. While UBS has handed over the details of some 300 clients as part of a separate settlement, the Swiss government has warned that it could be forced to seize the information, or even prosecute UBS should the information be handed over as it violates Swiss secrecy laws. The apparent unwillingness of either the Swiss or U.S. government to bend left UBS in an unenviable position, facing penalties in either locality.
Three U.S. citizens have already pleaded guilty to avoiding taxes, based on the information that UBS provided in the earlier settlement. The latest development came as U.S. Secretary of State Hillary Clinton met with Switzerland’s foreign minister, Micheline Calmy-Rey.

Corruption Scandal Roils Switzerland – US-FOREX.US

Forex-Publisher — Wed, 29 Jul 2009 19:46:02 +0000

A senior Swiss official accepting a 45,000 bribe? The U.S. citizen who made the allegation as he pled guilty to hiding money from the U.S. government might just has well have insulted all Swiss grannies. Switzerland prides itself on its clean image: the country ranks fifth on the 2008 Corruption Perceptions Index of Transparency International, which measures the perceived levels of corruption based on expert assessment and opinion surveys. The country also ranks third in the organization’s Bribe Payers Index, a survey which ranks countries in terms of their tendency to pay bribes abroad, starting with the least corrupt. However, the perception and the reality of corruption are quite different things, says Anne Schwoebel, managing director of Transparency International Switzerland. “We may not have many corruption cases but that doesn’t mean that corruption isn’t taking place. The ten or so cases that are prosecuted each year are just the tip of the iceberg,” she says.
Its Switzerland’s climate of secrecy that is probably contributing to its corruption problem. “Whistleblowers are not very well protected legally under Swiss law and can be dismissed, while the compensation they receive is small,” says Schwoebel, who added that a recent draft reform to improve the situation for whistleblowers was still well short of what was needed. “It’s a small country: people know each other and help each other. It’s very difficult to unearth corruption.” The reaction in Switzerland on Wednesday to the news out of the U.S. late on Tuesday was one of disbelief. As federal prosecutors said they were mounting an investigation, Hans-Rudolf Merz, the finance minister who currently holds the rotating presidency of Switzerland, expressed his skepticism about the accusations, warning it was important to distinguish “rumors” from “reality.”"There are different means to wage psychological warfare and – to say -it dramatically – some statements are made to exert pressure,” he told Swiss television. On Wednesday, a much anticipated trial commences in Florida, in which U.S. authorities will attempt to wrestle the details of some 52,000 UBS
clients in a dispute over tax evasion. On Tuesday, Jeffrey P. Chernick, a New York state resident pled guilty to filing false tax returns by hiding money in Swiss accounts. He said an unnamed attorney had told him thanks to a high ranking official his name would not be handed over to a U.S. tax probe, and that that official had been paid 45,000. However, his details were passed on as part of UBS’s 780 million settlement in February.

Credit Suisse Steps Up – US-FOREX.US

Forex-Publisher — Thu, 23 Jul 2009 22:46:06 +0000

So far this season with write-downs mostly behind them, banks with large investment banking operations have been falling into two categories: banks like Goldman Sachs saw revenues rising across the board, whileothers such as JP Morgan have seen their successes fall mainly in the fixed income category. Despite a still sluggish equities market, Credit Suisse fell firmly into camp of Goldman Sachs, the former bulge bracket that found new life as a bank holding company in 2008.
Credit Suisse
surprised the market with a profit for the June quarter that was 29% above last year, driven mostly by investment banking, though its asset management division also returned to profitability. Investment banking pre-tax profits came in at 1.7 billion Swiss francs , 43% above consensus estimates and nearly seven times the figure a year ago. Despite cutting headcount in the investment banking division 11% since last year, Credit Suisse has been targeting its existing strengths to build on, including in algorithmic – program- trading, prime brokerage, and on the fixed income side in currency and treasury products.”In the prime brokerage business they are putting a lot of focus on technology rather than hiring the big bonus golden boys,” remarked Jean Sassus, a European banking analyst at Raymond James Equities in Paris. Shares of Credit Suisse
soared 5.8%, to 51.80 Swiss francs , in Zurich on Thursday. One of the most positive surprises was the reduction in the bank’s risk-weighted assets which lifted its core tier 1 ratio to 15.5%, from 14.1% in the previous quarter.
Shares of rival UBS
also rose on Thursday off the back of the Credit Suisse figures, but the read across isn’t obvious. UBS has been making a concerted effort to separate out its three arms – investment banking, asset management and private banking in the wake of multi-billion dollar losses. By contrast Credit Suisse has, according to Sassus, “benefited from being able to cross sell products between investment and private banking. That’s their strategy.”

Swiss Bluster Pays Off For UBS – US-FOREX.US

Forex-Publisher — Mon, 13 Jul 2009 12:46:03 +0000

Are American authorities backing down in their attempt to wrestle around 52,000 client names from UBS?
Over the weekend, U.S. authorities appeared to be wavering on their tough line to get the names of wealthy American clients suspected of evading U.S. taxes. UBS and the U.S. Department of Justice called for the proceedings, due to start on Monday, to be delayed to Aug. 3, to allow Swiss and American authorities to “continue their discussions seeking a resolution of this matter.” Last week, Switzerland’s Federal Office of Justice firmly brushed aside U.S. claims that UBS
would not necessarily be breaking Swiss law by handing over the details. The Federal Office warned that it would seize the data from UBS to prevent a handover if its hand was forced. Florida-based U.S. Federal Judge Alan Gold will respond to the request from the two sides on Monday. A delay would be good news for UBS, which has all along insisted that taxation matters should be resolved at a government level, rather than directed at the bank itself. It has consistently declined to hand over information about its clients on the grounds that it would be violating Swiss law. Also, while the tax case has been a major overhang for UBS, it now seems that a compromise could be reached. Reuters has said that U.S. and Swiss authorities are attempting to find a route for handing over the data without breaching Swiss law, including by helping the Inland Revenue Service to cross check U.S. banks’ data about transfers from UBS.
UBS shares climbed 0.8%, or 10 centimes , to 12.73 Swiss francs , in Zurich on Monday.

Taxing Times For UBS – US-FOREX.US

Forex-Publisher — Wed, 08 Jul 2009 11:46:20 +0000

If UBS had hoped for any let-up from the Swiss government that could ease relations with United States tax authorities demanding the details of some 52,000 clients, it will be sorely disappointed.The Swiss Federal Office of Justice rejected the claim by U.S. authorities last week that UBS would not have to expect a criminal proceeding against it if it handed over the client information. “The government of Switzerland respectfully submits that it is the most authoritative source of information on Switzerland’s law and enforcement policies,” it said in a filing released on Tuesday in Florida. By contrast the IRS had made its assertion “without performing any of its own research or retaining its own expert on Swiss law.” It said that it would take whatever steps necessary to uphold U.S. law, including by “issuing an order taking effective control of the data at UBS that is the subject of the summons” – effectively seizing the information. This latest development in the saga that began in February when the Department of Justice launched the legal case, highlights the impossible situation that UBS has found itself in. On the one hand it could face prosecution in Switzerland if it did hand over the details – in its filing, the Swiss government highlighted how it had taken to court a man who had cooperated with German authorities in handing over “protected information” to avoid a prison sentence in Germany being extended. On the other, U.S. authorities have shown no sign of relenting in their pursuit of the details of the accounts belonging to U.S. nationals, even though the two countries have signed another double taxation agreement. They’ve firmly denied media reports in the U.S. that they might let the bank off the hook. “We have always maintained that all issues on tax matters should be discussed and resolved between governments,” said UBS spokesman Serge Steiner. “The summons would require UBS to violate Swiss law.” The civil trial is set to start on July 13 in a federal court in Miami Florida. In February, UBS
agreed to pay 780 million in fines, and handed over the details of around 250 clients, in a separate case. (See “UBS Wont Play Ball On ‘John Does’.”

UBS A Bid For Freedom – US-FOREX.US

Forex-Publisher — Fri, 26 Jun 2009 13:46:08 +0000

Is UBS testing the waters to see if it can get on without state support? This seems a possibility after the beleaguered bank announced Friday that it would place 3.8 billion Swiss francs with a small group of institutional investors to raise its core capital ratio by 100 basis points, to around 13%. “It could be a test and a sign that UBS wants to be able to work more independently,” said Marco Bider, a fund manager who helps oversee about 7 billion, including UBS shares, at Banque CIC in Basel.
This is the second capital-raising step by UBS this year, after it sold its lucrative Brazilian asset and wealth management division for 2.5 billion in April. The Swiss government holds 6 billion Swiss francs worth of mandatory convertible notes in the bank, which it took up last October, when an agreement was struck to put 60 billion of illiquid securities into a separate fund managed by the Swiss National Bank. Shortly afterwards, Credit Suisse announced it would be raising capital through private investors, leaving UBS potentially more vulnerable to state control than its main rival.
But analysts don’t see the capital raising as a sign of bigger problems to come. The Swiss National Bank has made it plain that it is eager for the two biggest banks in Switzerland, Credit Suisse
and UBS, to have more equity and less leverage than it had demanded previously. News of the capital raising came as the bank warned that it expected to post a loss for the second quarter of 2009, late on Thursday. The figure would be lower than the 2 billion Swiss franc net loss it booked in the first quarter, as activity picked up at its investment banking division and it took smaller write-downs as it reduced its risky positions.Speculation is rife about UBS’ second-quarter results being reported on Aug. 4. Some believe the worst could be over, and that the bank’s run-in with U.S. tax authorities may soon conclude. Others fear its loss in market share in investment banking will hinder a recovery.
Shares of UBS
fell 0.6%, or 8 centimes , to 13.89 Swiss francs , in Zurich on Friday morning.

Are The Swiss Meddling With Their Currency – US-FOREX.US

Forex-Publisher — Thu, 25 Jun 2009 11:46:10 +0000

If Switzerland made a move on its currency this week, it could be both dubious and trend-setting.Analysts believe other central banks could consider alternative means to stimuluate their economies after the Swiss franc fell sharply on Wednesday, leading to speculation that the Swiss National Bank had intervened to weaken the currency by selling it. The SNB isn’t commenting.This is in spite of the fact that selling currencies to help weaken them and thus support exports has been seen as overtly protectionist. “In the past couple of weeks we have had five or six central banks, including the Bank of Canada and the Bank of England, talking down their currencies,” said UBS currency strategist Geoffrey Yu. “Like Switzerland they are fearful that currency appreciation could offset the stimulus to the economy.”
Selling a domestic currency would be an additional measure to quantitative easing, or the buying of government or corporate bonds, that central banks like the Fed and Bank of England have done to support the economy when interest rates cannot go any lower. The market has had its eye on the Swiss franc since mid-March, when the Swiss National Bank said it would buy foreign currencies to support it. There followed more speculation about further interventions, particularly after the head of the SNB said on June 19 that it would do what was necessary to prevent an “irrational” rise of the currency. Speculation that the SNB had interfered in the currency markets on Wednesday began after the currency fell sharply against the dollar and euro, falling 3% and 1.8% respectively. The strength of the safe-haven Swiss currency has been a problem for Switzerland, whose exports account for more than half of its gross domestic product. The OECD is forecasting the Swiss economy to contract by 2.7% this year.
The euro continued to gain against the franc on Thursday, buying 1.532 francs, up from 1.5294 francs late on Wednesday, while the dollar remained flat at 1.098 to the franc.
In the coming months, the the Swiss currency could fall further, with the euro buying around 1.58 Swiss francs, said Ian Stannard, a currency strategist at BNP Paribas. During the current crisis, the franc had been appreciating as investors sought out save haven currencies, a trend that has similarly affected the Japanese yen.