UBS faces legal challenge in the US

Prosecutors in the United States have given UBS “several weeks” to hand over scores of United States client names or face possible indictment over its offshore banking services.

While no indictment is imminent any refusal to turn over the names could lead prosecutors to ask a federal judge to order UBS, the world’s largest private bank, to comply with a previous summons demanding the names of American clients using hidden offshore accounts. If UBS were to refuse an indictment could follow, perhaps within months.

Even if UBS turns over the names and averts indictment, it is almost certain to be forced into a deferred-prosecution agreement with a heavy fine. The bank could also face possible sanctions, from the Securities and Exchange Commission and banking regulators, that could limit its overall ability to conduct business in the United States.

A spokeswoman for UBS declined to comment on how the bank was dealing with the investigation. A US Justice Department spokesman also declined to comment.

UBS, a giant in global financial services, is battling to maintain its centuries-old tradition of Swiss banking secrecy amid mounting legal pressure from the US Justice Department to turn over up to 19,000 records of American clients who used hidden offshore accounts at the bank.

While the bank has not provided any names, it has in recent months submitted related records detailing transfers originating from the United States to same-name accounts in Zurich.

The Justice Department’s criminal investigation is focused on UBS’s provision of cross-border private banking services to United States clients. Prosecutors suspect that between 2002 and 2007, UBS helped these clients hide $20bn in violation of United States tax laws, thereby evading $300m a year in taxes. UBS shut down the business, which it had run out of three offices in Zurich, Lugano and Geneva in 2008 and has been closing the accounts.