Swiss bankers with financial giant UBS were trained how to detect and evade suspicion from law enforcement officials during overseas trips to recruit wealthy Canadian clients, a United States Senate subcommittee revealed yesterday.
According to the subcommittee, the training was all part of an intensive effort to target wealthy North Americans and help them evade taxes.
Facing mounting criticism over its conduct, the bank announced at yesterday's hearing that it is no longer providing offshore banking nor securities services to U.S. residents.
"I am here to make absolutely clear that UBS genuinely regrets any compliance failures that may have occurred," Mark Branson, chief financial officer of UBS Global Wealth Management and Business Banking, told the subcommittee.
"We will take responsibility for them; we will not seek to minimize them."
Subcommittee chair, Michigan Senator Carl Levin, said he was stunned by the company's concession. "I thought we were prepared for any possibility. It turns out we weren't."
An undated UBS training manual entitled Case Studies Cross-Border Workshop, offers tips on how to maintain a tight seal on the identities of the bank's North American clients, and asks bankers to contemplate various scenarios involving police and border guards.
"After passing the immigration desk during your trip to the USA/Canada, you are intercepted by the authorities. By checking your Palm [handheld device] they find all of your client meetings. Fortunately you stored only very short remarks of the different meetings and names."
The manual also raises this case: "The longer you stay there, the more you get the feeling of being observed. Sometimes you even doubt if all of the hotel employees are working for the hotel. A lot of client meetings are held in your suite of the hotel. What would you do in such a situation?"
When asked why a Swiss UBS banker would need to go to such lengths to hide information while doing business in North America, Mr. Branson replied that disclosing client information - even to a border guard - could be against Swiss law.
The subcommittee's findings come a month after a UBS Swiss banker, Bradley Birkenfeld, pleaded guilty to helping his top client, U.S. real estate developer Igor Olenicoff, evade more than $7-million (U.S.) in taxes.
Graeme Harris, a spokesman for UBS Canada wrote in an e-mail that the announcement will not have any impact on the bank's operations in Canada.
Mr. Branson's announcement marks the latest victory for the U.S government's clampdown on foreign financial institutions that help wealthy Americans hide their assets and evade taxes.
In addition to UBS, the subcommittee has also zeroed in on the LGT Group, a bank based in the 35,000-person European principality of Liechtenstein. The subcommittee's findings were based largely on information from two banking insiders: UBS's Mr. Birkenfeld and Heinrich Kieber, a former LGT employee who stole banking records on more than 1,400 LGT clients, including 100 Canadians, and helped distribute them to tax authorities around the world.
Mr. Birkenfeld, who once purchased diamonds using one of his clients' Swiss accounts and smuggled them into the U.S., detailed in a private interview with congressional investigators a litany of tactics he and his former colleagues used to avoid the prying eyes of revenue authorities, regulators and police.
UBS's Swiss bankers never sent mail across the Atlantic to their clients, he said. Rather, they would provide them with "cryptic notes" during in-person meetings, he said in his interview.
Some of his former colleagues also relied on encrypted computer programs and they were sometimes encouraged to misrepresent the purpose of their visits on customs forms, checking off the "personal" box, rather than "business," he said.
They were also well-schooled in where to find potential clients, he said.
"You might go to sporting events. You might go to car shows, wine tastings. You might deal with real estate agents. You might deal with attorneys. ... It's really where do the rich people hang out, go and talk to them," Mr. Birkenfeld told the committee.
Greg McArthur