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UBS Faces a New Tax-Evasion Probe

Posted in Offshore Account Update, UBS / HSBC on April 24, 2015 | Share

The crackdown on banks continues, as UBS AG once again faces legal questions from the IRS and the Justice Department.  Federal authorities are not only going after banks that helped clients hide cash in offshore accounts, but they are now looking at whether UBS AG facilitated the purchase of investments that are banned in the United States. The new DOJ and IRS probe is focused on whether UBS allowed the purchase of bearer securities as part of efforts to help clients evade US tax obligations.

As the federal government aggressively goes after banks for their part in tax evasion, many of these banks respond by turning over information on the customers they helped hide money from the Internal Revenue Service.  Investors need to be proactive in talking to a Washington DC tax attorney before they are accused of involvement in a tax evasion in order to develop a strategic plan for minimizing financial consequences and avoiding any criminal penalties.

UBS Under Investigation for Allegedly Facilitating Tax Evasion Through Bearer Securities

Bearer securities are payable to the bearer or investor in possession of the securities, but the securities are not registered in the books of the issuing corporation.  Physical possession of a bearer bond is the only proof of its ownership, in contrast to registered securities which the issuing firm keeps records of. 

Since there is no record of bearer securities, no forms filed with the IRS and no ownership trail, bearer securities can be an effective way to invest while hiding income from the IRS. Because of this feature of bearer securities, they have been outlawed for decades in the U.S. The DOJ and IRS, however, believe that UBS sold these securities to U.S. investors to help them evade taxes and to potentially commit securities fraud.   Investigators are looking into whether these illegal investments were marketed to U.S. clients.

UBS may not be the only financial institution that has to answer questions about illegal marketing of bearer bonds, but the government may be looking especially hard at UBS since the bank settled prior claims of facilitating tax evasion for $780 million in 2009.

UBS foreign bankers and advisors have also been convicted of helping clients hide money.  One UBS banker was sentenced to five years probation after turning over the names of other bankers enabling tax evasion, while another who worked for UBS and then Credit Suisse was also charged with helping UBS clients to hide as much as $500 million from the IRS.  Bankers, like the banks they work for, are providing evidence to federal investigators in exchange for deals that let them avoid or limit jail time.

With these new investigations into bearer securities, investors should be worried not only if they failed to report foreign accounts, but also if they made strategic investments designed to hide profits from the IRS.  Do not wait until the bank turns your name over and you become the subject of an investigation - talk to Kevin Thorn, a DC tax attorney, today for help understanding what your options may be for dealing with the Internal Revenue Service.


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