The FT has reported:
Senior executives at UBS, the Swiss bank being investigated by US authorities, knew some of their bankers had acted in a way that meant they risked breaching American securities laws at least a year before the US inquiries began, a letter seen by the Financial Times shows.
The May 2006 letter, now in the hands of the US Department of Justice, was written by Peter Kurer, UBS chairman and then the bank's general counsel, and copied to Marcel Rohner, then head of private banking and now group chief executive, as well as Lawrence Weinbach, a UBS director who sits on the board's audit committee.
Mr Birkenfeld, who admitted this year to helping a billionaire US businessman evade millions in tax while at UBS, has been co-operating with the authorities.
In a sense there's no news in this: the US investigations have shown that UBS was analysing differing profitability on the accounts it knew to be declared and undeclared several years ago. But showing that those in the highest echelons of the bank definitely knew this is new. It raises enormous questions:
1) Why didn't the auditors refer to this in their reports?
2) Why wasn't voluntary disclosure made in the USA?
3) Were suspicious activity reports filed?
Let's be clear: all look very vulnerable to claim if this allegation is true, but those who look especially vulnerable are those in a position to have authorised voluntary disclosure and who did not. That's a money laundering offence. It's literally criminal not to disclose tax evasion (which is always money laundering in the USA and most other states) once you know the facts. And if that happened here I seriously hope these people are taken to court for not making that declaration.
Banks claim self regulation works and that they can be trusted in mainstream economies, let alone in tax havens. If it is apparent that UBS knew it was facilitating fraud and took no action to report it then the money laundering systems of the world are laid as for a charade in which bakers play the game of compliance and actually facilitate tax evasion.
Of course, I've suggested this is exactly what they have been doing for a long time. I'm convinced it's true. But it's only by putting some of the senior people in some of the biggest banks - and I mean CEOs and chairmen - behind bars that things will change.
And please don't say I'm being unreasonable: if written evidence was a available that a person was providing a systematic mechanism to defraud the UK benefit system by a few thousand pounds a year the perpetrator would go down, without a doubt. This evidence, if true, suggest UBS was willing to:
a) defraud the US by billions of dollars a year
b) do so systematically
c) do so with the knowledge of the Board
d) do so without taking the necessary action to voluntary disclose its crime as required by law.
If that isn't enough to require very long sentences for those involved, if true, I'm not sure what is.
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Richard,
Nice editing job. The article continues:
In the letter, Mr Kurer acknowledged he had received information from a whistleblower, who had drawn attention to the problems the bank faced because of the inadequate securities registration. Mr Kurer writes that the information prompted an internal investigation in which UBS interviewed 12 of its private bankers who had been dealing with wealthy American clients and he would be recommending procedural changes to management.
“I thank you for drawing my attention to this compliance issue,” Mr Kurer wrote. He added that in keeping with bank policy, the whistleblower “must not fear any retaliation”.
UBS officials stress the whistleblower referred only to possible breaches of securities law, and not the tax evasion issues being investigated. UBS also said Mr Kurer acted swiftly to tighten procedures after investigating the whistleblower’s allegations, and introduced measures to ensure the procedures were properly implemented and observed.
Georges
I presume you know nothing of money laundering rules. These require that you investigate breaches.
The securities regulations breached in this case related to what are, in effect, tax issues. A breach was likely to result in failure to comply with tax law resulting in evasion occurring. Unless immediate steps were taken to remedy that consequence money laundering failures must have resulted, in my opinion.
Despite this, and although there is internal evidence that the US Senate has reported that UBS was well aware that not all accounts it held were declared properly for US purposes, the investigation into the issue did not find this fact.
In that case either a) the UBS denial is wrong or b) the investigation of the whistleblower’s accusations was a whitewash that failed to investigate the consequences of the compliance breaches.
What else can you conclude? I can suggest nothing else.
Richard
Richard,
I presume you know nothing of US regulatory reporting issues. It is the US Treasury, not the US Senate, which investigates issues related to compliance.
You set up a straw man and then agree with your own “in effect”, “likely” and “opinion”.
As far as any report coming out of the US Senate [comprising the worst of all worlds, a governmental body AND comprised of politicians (they never stretch the truth, tub thumb, evade reality, or grandstand do they?)], so what? Take it with a grain of salt and remember it is an election year.
Once all the facts are in then reasonable conclusions can be drawn about whether this was a few “bad” apples (“bad” in the legal sense of the word, not in the higher sense of the word in that they may have been nefarious in assisting individuals keep what is rightfully theirs in the first place) at UBS or it was that often sought, yet rarely found, corporate-wide bogeyman.
Why did you edit the portions regarding UBS’ internal investigation and conclusions from your original post? To slant and misrepresent the facts and context to the reader?
What else can you conclude? I can suggest nothing else.
I edited for two reasons:
a) I quote selectively to avoid copyright issues
b) I considered them spin
The US Senate report on UBS used data, not speculation, as the basis of its reporting. I believe it wholly reliable
But you’d rather see ‘bad apples’ rather then an orchard needing felling
Is that because you are indifferent to crime?