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UBS ‘regrets’ bank failings, executive tells tax inquiry (Shell CFO Peter Voser is a director of the scandal hit UBS Bank)

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UBS ‘regrets’ bank failings, executive tells tax inquiry

By Joanna Chung in New York and James Politi in,Washington

Published: July 18 2008 03:00 | Last updated: July 18 2008 03:00

UBS “genuinely regrets” any compliance failures that may have occurred in conducting business with US clients, a senior executive of the Swiss bank yesterday told a Senate sub-committee investigating tax haven abuses.

A continuing internal investigation suggested that “misconduct occurred that we consider unacceptable”, said Mark Branson, chief financial officer of UBS Global Wealth Management and Business Banking.

“We will take responsibility for them; we will not seek to minimise them. On behalf of UBS, I am apologising, and committing to you that we will take the actions necessary to see that this does not happen again.”

His testimony follows a six-month investigation into UBS and Liechtenstein’s LGT Group by the Senate permanent subcommittee on investigations, which estimated that the US Treasury loses about $100bn (€63bn, £50bn) in tax revenues from offshore tax abuses.

The committee’s report alleged that UBS and LGT employed banking practices that “could facilitate, and have resulted in” tax evasion by their US clients.

Carl Levin, the Democratic chairman of the subcommittee, said the banks used “tricks” that were “all about deception, all about making it impossible for the Internal Revenue Service to follow the money, bring tax cheats to justice, and bring back into the US treasury the tens of billions of dollars owed to Uncle Sam”.

Mr Levin said tougher measures were needed to crack down on tax haven abuse, including penalising banks that impede US tax enforcement, and barring US financial institutions from doing business with them.

UBS, which is being investigated by the Department of Justice and the IRS, told the subcommittee that the bank held 19,000 accounts worth roughly $18bn for US clients that it had not declared to the IRS.

Mr Branson said that the bank has decided to “exit entirely” the business in question, meaning that UBS would no longer provide offshore banking or securities services to US residents through its bank branches.

“Such services will only be provided to residents of this country through companies licensed in the US,” he said, adding that UBS was working with the US government to identify names of US clients who may have engaged in tax fraud.

Mr Branson was one of the number of witnesses called to testify yesterday. Martin Liechti, a senior UBS private banking executive, who has been detained by US officials as a material witness, appeared before the hearing but invoked his rights against self-incrimination, as did several other witnesses.

Heinrich Kieber, a former LGT employee who testified by videotape, told the hearing that shell companies and fake transactions were used to make it “extremely complicated” for law enforcement agencies.

LGT said it had co-operated with investigators but would not testify.

It said that it was unable to comment on confidential documents which were “stolen” by a former employee and that it complied with US tax law.

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