UBS: their business model was illegal

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This report is typical of many tonight:

UBS admitted it broke U.S. law in setting up sham offshore tax shelters for wealthy Americans and agreed to work with U.S. authorities in reviewing 19,000 accounts to identify clients who may have committed tax fraud.

"Our compliance system had failures, and misconduct appears to have occurred," Mark Branson, chief financial officer of UBS's global wealth management unit, told a Senate panel today. "It is apparent now that our controls and supervision were inadequate."

Mr. Branson also said UBS will discontinue offering offshore banking and securities services to American clients through branches that aren't licensed in the U.S. The firm allowed its Swiss bankers to market securities and banking services on U.S. soil without a proper license from 2000 to 2007, according to a report released today by the Senate Permanent Subcommittee on Investigations.

There is though a point I want to make: it is not apparent that UBS's controls and supervision were inadequate. What is apparent is that their business model was illegal. And please don't tell me they didn't know it. It was their job to know it, so we can and must assume they did know or were criminally negligent if they did not. Either way, their business model was illegal.

And how do I know that what they did was deliberate? Well look at what Mr Branson says. He only says they're stopping in the US. Nowhere else. Of course, promoting tax evasion is illegal just about anywhere (bar Switzerland and Liechtenstein), but UBS seems to be following the line that they'll stop it when caught. I'd love to think I'm wrong, but it doesn't look like it.

We now know UBS has acted illegally. The really troubling thing is we have absolutely no evidence at all they've stopped doing so.

And you can be sure of this: they're not alone. This is the offshore world. And Switzerland is very definitely an offshore finance centre, whatever the IMF says.


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