US Tax Probe Broadens to Israeli, Asian Banks

A US tax evasion investigation that has prompted charges against several Swiss bankers has expanded to include Israeli and Asian banks, according to lawyers close to the probe.


The broadening of the investigation follows advice given by Swiss bankers, concerned at an initial probe into UBS, who allegedly told clients to shift assets to banks in other countries rather than report them to the US.

“Many of the Swiss bankers simply told their clients that they should move their money to other secret accounts,” said David Garvin, a criminal tax attorney in Miami representing account holders.

He said the US government had made clear it was “going after any bank it knows to be a problem”.

Swiss bankers fear the US authorities, emboldened by information from thousands of taxpayers who have come forward under a voluntary disclosure programme, are poised to extend their investigations into more Swiss banks.

Their anxieties follow the indictment last week of four Credit Suisse bankers.

While Credit Suisse says it is not under investigation and is co-operating with the inquiry, senior bankers and lawyers say it is only a matter of time before the bank is dragged into the probe, along with smaller Swiss private banks and even some public sector cantonal banks.

“The risk in the cross-border business has always been compliance. If you break these laws, you have to take the consequences,” said Oswald Grübel, UBS chief executive.

The US Justice Department and Internal Revenue Service have received information about accounts at Bank Leumi in Israel and China Merchants Bank, say Mr Garvin and other lawyers for account holders.

The US has not alleged either bank was engaged in wrongdoing.

Bank Leumi said it was not aware of the investigation. A China Merchant Bank representative referred calls for information to its office in China.

Another lawyer said clients had voluntarily disclosed offshore accounts in New Zealand, Australia, India, the Bahamas, the Cayman Islands and the Channel Islands.

The expansion follows the IRS’s voluntary disclosure programme that prompted 14,000 individuals to report offshore accounts and unpaid taxes in exchange for leniency. Those disclosures have helped provide a roadmap for a crackdown on offshore tax havens.

In 2009 the IRS opened criminal investigation offices in Beijing, Panama City and Sydney.

Last week’s conspiracy charges against the Credit Suisse bankersalleged one advised his client to transfer his account to an Israeli bank, which a person familiar with the matter identified as Bank Leumi. Two other clients allegedly transferred accounts to a Bahamas bank.

The charges also referred to two small Swiss private banks, subsequently identified as Maerki Baumann and Bank Frey. Previous charges in the UBS probe mentioned the Basel cantonal bank.

There is no allegation that the three did anything wrong and all three stated their compliance with relevant laws.

Three weeks ago, US authorities arrested another Credit Suisse banker, Christos Bagios, who previously worked for UBS. Mr Bagios is in custody and his case is expected to be unsealed this week, a person familiar with the matter said.