Are Swiss bank accounts safe havens today?

Matt Buttell

The Swiss bank UBS AG has been fined US$13.3 million (8.9 million euros) this week after management failures allowed employees to make unauthorized trades with customers' accounts. This has given rise to concerns that the days of Swiss bank accounts being tax safe havens are well and truly over.

The issues don't end there for UBS. The Zurich-based financial services firm is also facing one of its biggest challenges as its wealth management business, which has already suffered from structural changes in the business, reveals it may see more clients taking their wealth elsewhere in the coming quarters.

According to reports, clients at UBS continued to pull out funds in the third quarter of this year, resulting in net new money outflows of 16.7 billion Swiss francs (11 billion euros) at its wealth management business, which includes private banking, or managing funds for very rich clients - a presupposition of the type of clients that Swiss bank accounts cater for.

Management

But it seems the rupturing of the safe haven dream permeates even further, with reports today revealing that the near-record fine imposed on UBS by the British financial services watchdog is part of an unfolding investigation into the past management of Indian private banking accounts, including two linked to revered tycoon Anil Ambani.

According to the Financial Times, for instance, the India-related activity has spawned an investigation by the country’s government into possible misuse of Swiss bank accounts, while the UK's Financial Services Authority (FSA) is probing the conduct of former UBS employees.

As part of the Indian investigation, the government’s Enforcement Directorate has been investigating whether what it called "unspecified parties" violated foreign exchange transactions by misusing UBS accounts in London held by Mr Ambani’s Reliance Natural Resources and Reliance Energy.

The investigation will look into allegations that funds from overdrafts on the accounts were transferred through the accounts of a group of diamond dealers based in India and Belgium to a Mauritius fund owned by UBS, from where they were invested in Indian stocks through offshore derivatives.

The investigation, which suggests no wrongdoing by either Ambani or Reliance, certainly seems to suggest there has been illicit activity somewhere down the line - an interesting point, considering the age-old myth that Swiss bank accounts only attract criminals and dictators.

Long-gone

Further to this, UBS has also been asked to hand over account-holder details to the Australian Tax Office (ATO) after the Swiss bank revealed roughly 4450 client names to US authorities back in August in order to settle a tax case.

As such, the move by UBS to hand over account details is one of a number of developments that have dealt blows to the tradition of strict Swiss bank account secrecy laws. In the past this tradition has seen it become the world's largest offshore tax haven.

Now, according to analysts, this move by the ATO should be seen as a real source of concern to anyone who has taken the view that they can hide money off-shore in Swiss bank accounts, highlighting to those wealthy individuals that the days of being able to conceal money off-shore are over."

 

 

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