Swiss govt to block bank data from US

9th July 2009, Comments 0 comments

The Swiss government vows to prevent UBS from releasing client data to US tax authorities.

Zurich -- The Swiss government vowed to prevent banking giant UBS from releasing client data to US tax authorities, including by seizing information, documents published on Wednesday showed.

In a filing to a US District Court in Miami, Bern also accused US officials of seeking to "provoke international conflict" through a lawsuit to force UBS to reveal names of 52,000 US clients suspected of tax evasion.

"The government of Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally," said the Swiss government in its filing.

This includes "if necessary by issuing an order taking effective control of the data at UBS that is the subject of the summons and expressly prohibiting UBS from attempting to comply" with the US authorities.

UBS, one of Switzerland's biggest banks, has argued that it cannot comply with the US demand as it would violate Swiss banking secrecy law and could therefore make it liable for prosecution in Switzerland.

In its court filing, the Swiss government supported UBS's claim, saying the company was "unable to comply with the summons without violating Swiss law" and stressing that it would intervene if necessary.

"It is hoped that it will be unnecessary for the government of Switzerland to take the extraordinary action of issuing an order to seize the information at issue, but such an action should be expected if the IRS (Internal Revenue Service) continues to pressure UBS to violate Swiss law," the government said.

Yielding to strong international pressure against its banking secrecy rules, Switzerland earlier in 2009 agreed to negotiate two-sided deals to help foreign authorities control tax cheats.

But such deals would allow information to be exchanged only where there is evidence of cheating.

Bern accused the US prosecutor of "not doing its own research or retaining its own expert on Swiss law."

In refuting Washington's claim, the Swiss government referred to a case in which a defendant was jailed in Switzerland for releasing bank data to German authorities to avoid extending his prison sentence in Germany.

It also contested the US claim that the court must consider Switzerland’s interests in banking secrecy, particularly since UBS admitted in February to tax fraud in the United States.

The bank then agreed to pay USD 780 million (EUR 560 million) under a provisional deal to settle charges that it helped US clients evade taxes.

For Switzerland, Washington's claim means that US interest is "always preeminent" and ignores foreign interests entirely.

"The Government of Switzerland did not condone the actions for which UBS has been punished... but that does not create a basis... to abandon the respect that should be accorded between nations to avoid conflicts of sovereignty," it said.

Swiss President Hans-Rudolf Merz on Tuesday suggested that UBS could resolve the US issue by paying taxes claimed by the US on behalf of its clients.

"Rather than the clients who have withheld assets from the American tax authorities, UBS can pay," he told Swiss radio DRS.

UBS, which posted losses reaching USD 17 billion in 2008, warned in June of further losses in the second quarter. It also sought CHF 3.8 billion in fresh capital to bolster confidence.

AFP / Hui Min Neo / Expatica

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