UBS to release Swiss bank account details to IRS

Swiss banking giant UBS AG has agreed to turn over details of 4,450 Swiss bank accounts suspected of holding undeclared assets to the IRS.

A watershed moment in the Alpine nation's famous confidentiality policy, the deal announced Wednesdayends an intense transatlantic legal fight.

The deal will give the Internal Revenue Service thousands of long-sought account names, and is expected to provide even more UBS clients who voluntarily disclose their financial details to the agency, IRS commissioner Doug Shulman said.

The tax agency claims the accounts held the equivalent of $18 billion US in assets at one time, but many have since been closed by their American account holders.

UBS has an estimated 52,000 accounts of U.S. customers. The IRS chief said the 4,450 accounts being relinquished to the agency were the ones most suspected of containing undeclared assets.

"I believe this agreement gives us what we wanted access to information about those UBS account holders most likely to have been involved in offshore tax evasion," Shulman said.

'People hiding assets and income offshore will find themselves increasingly at risk.' Doug Shulman, IRS commissioner

He said other account holders appear to be in compliance with U.S. tax laws.

On Aug. 12, the two sides told a federal judge last week they had reached a tentative agreement on "the John Doe case," but the details were not released until Wednesday.

"This disclosure does not constitute a breach of Swiss bank client confidentiality, and UBS remains firmly committed to it," the banking conglomerate said in a release.

Under a 75-year-old law, Swiss banking secrecy can only be lifted when individuals are deemed to have defrauded tax authorities deliberately as opposed to failing to declare all assets, a distinction Switzerland and other tax havens make.

In February, Swiss President Hans-Rudolf Merz vowed to uphold that tradition.

Account holders will be notified before their names are released to the IRS. They will then have the ability to appeal their release before Switzerland's Federal Administrative Court.

The process is expected to take several months, IRS officials said.

Shulman said the Swiss government has assured U.S. authorities that the release of the names conforms with both Swiss banking laws and the tax treaty signed by both countries. Shulman said the IRS reserves the right to resume its legal fight if any of the names are withheld.

"This issue is not going away, and people hiding assets and income offshore will find themselves increasingly at risk due to our efforts in this area," Shulman said.

Swiss bankers give OK to pact

The Swiss Bankers Association issued a statementsupporting the agreement.

"The out-of-court agreement avoids a prolonged legal battle that would have had an uncertain outcome and UBS can now continue with its consolidation process in an atmosphere free of this legal uncertainty," the association said.

Swiss Justice Minister Eveline Widmer-Schlumpf told a news conference in the capital of Bern that the deal lifts the threat of criminal prosecution against UBS, which could have endangered the bank's very existence and dealt a severe blow to the Alpine nation's economy.

"There was no alternative to this solution," she said.

Asked if other Swiss banks could be targeted for future prosecution in the United States, she said: "We don't expect this to be the case."

"I am confident that the agreement will allow the bank to continue moving forward to rebuild its reputation through solid performance and client service," UBSchair Kaspar Villiger said.