By Dylan Griffiths and Klaus Wille Nov. 17 (Bloomberg) —
Switzerland said it will turn over details of UBS AG accounts held by U.S. residents who had more than 1 million Swiss francs ($985,000) in undeclared assets to the Internal Revenue Service, as the government released a list of criteria used to screen bank clients for tax fraud. Other benchmarks include U.S. citizens who were beneficiaries of “offshore company accounts,” according to a statement distributed by the Swiss Justice Ministry in Bern today. In both cases, the review period is between 2001 and 2008 and there has to be a suspicion of “tax fraud and the like.” Switzerland agreed in August to hand over data on about 4,450 UBS accounts to the U.S. to settle a lawsuit related to suspected tax evasion. Swiss authorities withheld details of how the accounts were selected for 90 days so the information didn’t interfere with the IRS’s voluntary disclosure program. The criteria will be used as a template by the U.S. to pursue banks and tax evaders in other financial centers, lawyers say. “This is a mega-trend, and the IRS is going global,” William Sharp, a lawyer at Sharp Kemm, PA in Tampa, Florida, said before the criteria were released. “The days of bank secrecy are over.” The IRS plans to hire 800 people in the next year and increase staff in eight overseas offices, including Hong Kong, Commissioner Douglas Shulman said Oct. 14. The agency will also open offices in Beijing, Sydney and Panama City. ‘Tax Fraud’ U.S. prosecutors are already trying to determine what role financial professionals in Hong Kong play in tax evasion, people familiar with the matter said last week. UBS will give account information to a Swiss government task force, which will decide what it can relay to the IRS without violating Swiss law. The entire process is expected to take about a year. UBS used a list of criteria released today to determine whether account holders committed “tax fraud and the like.” Those criteria included the submission of documents to conceal assets and income that wasn’t fully declared, according to the Swiss government. In cases where tax fraud or the like is proven, details of accounts with at least 250,000 francs can be disclosed to the U.S. authorities. The IRS may hope the publication of the Swiss criteria will persuade more people to disclose their accounts as the U.S. is joined in its search for undeclared money by authorities in the U.K., France and Italy, said Stephanie Jarrett, a partner at Baker & McKenzie in Geneva. ‘Harder and Harder’ “There are still a lot of people out there who want to sort things out,” Jarrett said before the criteria were released. “It’s going to get harder and harder for people who are undeclared.” Under the IRS’s voluntary disclosure program, taxpayers must pay any tax owed, plus interest and a 20 percent penalty on the highest balance during the preceding six years. In return, they avoid possible criminal prosecution that could result in as much as 10 years in prison and $500,000 in penalties. About 7,500 Americans with undeclared assets overseas disclosed those holdings to the IRS by the Oct. 15 deadline, according to the U.S. Justice Department. The U.S. sued UBS on Feb. 19 to force disclosure of additional client details. That came a day after the bank agreed to provide the names of 250 account holders and pay $780 million to avoid prosecution for helping wealthy Americans evade taxes. Since the February settlement, prosecutors have won guilty pleas from six UBS clients who described a web of bankers, lawyers and advisers who helped conceal income and assets. All six hid money in shell companies outside Switzerland. The revenue services of the U.K., Australia and other countries have also asked for information on UBS’s cross-border wealth management businesses, the bank said in its third-quarter earnings report on Nov. 3. Zurich-based UBS said it’s cooperating with these requests “within the limits of financial privacy obligations under Swiss law.” To contact the reporter on this story: Dylan Griffiths in Geneva at dgriffiths1@bloomberg.net; Klaus Wille in Zurich at kwille@bloomberg
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