Swiss Banking Secrecy is Fading; Americans with Non-Compliant Offshore Accounts Must Take Immediate Defensive Action

by Asher Rubinstein, Esq.1

Faced with a criminal tax prosecution by the U.S. government, a civil lawsuit by the I.R.S., and criminal indictments against some of its top managers for promoting tax fraud, UBS capitulated on February 18, 2009. In agreeing to a “deferred prosecution”, UBS will pay $780 million to the U.S. and disclose the names of Americans with undisclosed foreign accounts. If UBS fully complies, the U.S. will drop the criminal charges in 18 months. Contemporaneous with the February 18 settlement, UBS disclosed to US authorities the identities of some 250 American account holders. Thousands of additional Americans with undisclosed foreign accounts are still at risk of their identities being revealed by UBS in the civil lawsuit, which was not settled by the deferred prosecution. Various reports estimate that between 17,000 and 52,000 additional non-compliant accounts were created at, or by, UBS, containing both cash and securities.

In a further initiative to access those accounts and determine the identities of their U.S. owners, the day after agreeing to the deferred prosecution of the criminal case, the IRS sued UBS in the parallel civil proceeding for disclosure of account information. In addition, the Senate Permanent Subcommittee on Investigations is conducting hearings regarding the U.S. government’s efforts to uncover the identities of Americans with non-compliant offshore accounts. The Senate Subcommittee hearings will address other foreign tax havens and non-compliant foreign accounts, in addition to the specific initiative against UBS.

The intensity of the multi-pronged U.S. offensive against UBS is further demonstrated by three additional remarkable facts. First, the Swiss Financial Market Supervisory Authority apparently allowed UBS to disclose the American account holders, thereby ignoring long-standing Swiss bank secrecy law and tradition. Second, U.S. prosecutors were given the account information without going through the normal procedure whereby the request for account information is submitted to a Swiss court of law, which then adjudicates whether or not the information should be released. Third, the account holders were not notified before the banking data was released, a further procedure that was ignored. In overcoming these once formidable legal and customary hurdles, the U.S. demonstrated its resolve and ability to discover the identities of Americans with non-compliant offshore accounts.

Credit Suisse and HSBC are also under investigation for promoting U.S. tax fraud, and will likely follow UBS in revealing U.S. client banking information, as will other banks, as the U.S. investigation widens.

UBS’ surrender is the latest event in a continuing, and strengthening, campaign to eliminate bank secrecy and crack down on non-compliant offshore accounts owned by Americans. In 2007, Senator Levin, together with then-Senator Obama, introduced a bill in the Senate to prevent tax shelter abuses and increase disclosure requirements for assets held in offshore jurisdictions. Stop Tax Haven Abuse Act, S-681. President Obama is expected to introduce a law to further crack down on non-compliant offshore accounts. The law will likely include additional measures to reveal the U.S. owners of “secret” offshore accounts. After revealing the American owners of the offshore accounts, the next step is to prosecute them for criminal tax fraud. The failure to timely and properly disclose an interest in an offshore account can lead to large fines and penalties. If the lack of disclosure is deemed intentional, criminal prosecution for tax fraud and jail time is a frightening possibility.

Beneficial owners of undisclosed foreign accounts (including accounts held in the name of nominees) must evaluate their options and take immediate steps to minimize the risk of I.R.S. criminal prosecution for tax fraud.

Option A: Convert to a Tax-Compliant Structure

Our firm has long counseled proper tax disclosure with respect to foreign accounts and the use of tax-compliant strategies to minimize U.S. taxation on foreign assets. We also advise clients on the legitimization of non-compliant offshore assets. We counsel clients with regard to the proper steps to transform a non-compliant offshore account into one that complies with current U.S. law. Although we cannot erase a non-compliant past, we can ensure full compliance going forward. Such steps may significantly reduce the chance of discovery and prosecution for previous violations.

Option B: Pre-emptive, Anonymous Negotiation and Disclosure

Additionally, if you currently have an interest in a non-compliant offshore account, you may consider voluntary disclosure of that interest before the I.R.S. discovers it. Such a pre-emptive disclosure is best made by qualified legal counsel, experienced in offshore compliance and in I.R.S. negotiations. We can approach the I.R.S. on a hypothetical “no-name” basis, demonstrate proper current compliance and negotiate on your behalf to avoid criminal prosecution and reduce fines and penalties for past non-compliance. Although fines and penalties may be significant, they pale before the consequences of an I.R.S. criminal prosecution. We have a very successful track record with the I.R.S.

If you are one of the thousands of American taxpayers with a foreign account that you thought was secret, you have very little time to bring it into compliance. Given that UBS has caved in and already revealed the identities of some U.S. account holders, we can expect that UBS, Credit Suisse, HSBC and other banks will provide a complete list of U.S. account holders in the near future.

Regardless of which strategy you pursue, failing to remedy a non-compliant offshore account puts you at serious risk of harsh penalties, including I.R.S. criminal prosecution, in the event of discovery. As recent events have proven, discovery is very likely. The window of opportunity is closing fast.

Kenneth Rubinstein will be interviewed on Bloomberg on Friday, February 20, between 5 and 6pm Eastern Time, regarding asset protection and offshore developments.  Please contact us for how to view the interview on television, radio and streaming over the Internet.

FOREIGN TRUST SURVIVES CREDITOR CHALLENGE – - OFFSHORE ASSET PROTECTION SOUND, LEGAL AND EFFECTIVE

Two recent news stories have led to hasty and unfounded pronouncements of the “death of offshore asset protection”. The first was the theft of confidential banking information from a foreign bank and its sale to German tax authorities. The second was the subsequent exposure of banking giant UBS as a promoter of U.S. tax fraud. Both stories have at their core tax fraud involving strategies based on “hiding assets”. We have long counseled that non-reporting of foreign assets to the IRS and relying on supposed offshore “secrecy” in order to avoid taxation is unlawful, unwise and would negate effective asset protection. The following actual case study proves that offshore asset protection, when done properly and lawfully, is completely legal and 100% effective.

In 2004, one of our clients established an irrevocable asset protection trust in Liechtenstein with funds totaling $1.2 million. The client filed all required IRS forms relating to the funding of the trust and paid U.S. tax annually on all trust income.

In 2006, a U.S. creditor obtained a New York state judgment of more than $1 million against the client. Shortly thereafter, the judgment creditor served a restraining notice against the client’s U.S. assets. However, the client had minimal attachable assets in the U.S.

Frustrated with the lack of attachable U.S. assets, in 2008 the creditor commenced a legal action in Liechtenstein, hoping to get to the assets in the trust. The creditor argued that because the client had established the trust, and because the client was a beneficiary of the trust, our client had a right to trust assets which was attachable by the U.S. creditor.

A lower Liechtenstein court temporarily restrained the trustee from transferring trust assets while that court considered the U.S. creditor’s claim. However, an appellate-level Liechtenstein court quickly determined that our client had no “right” to trust assets that was attachable because the trust was a discretionary trust. Therefore the Liechtenstein courts lacked jurisdiction over our client. The appellate court cancelled the restraint on trust assets. Thus, the trust assets were protected from the creditor’s U.S. judgment. Incidentally, the U.S. creditor was required to deposit $100,000 with the Liechtenstein court to cover our client’s legal costs.

The Supreme Court of Liechtenstein affirmed the decision of the appellate court, effectively dismissing the creditor’s challenge against the trust. Our client’s assets remain safe and secure in Liechtenstein. In addition, the creditor was ordered to pay the legal fees of the trust and our client.

This case is instructive in a number of ways. First, the ultimate lesson here is that despite the legal challenge by a U.S. creditor, the Liechtenstein trust assets remain safe and protected. The U.S. creditor was forced to commence a new action in a foreign jurisdiction, pay legal fees in advance (contingency fees are not allowed in good offshore jurisdictions), and overcome short statutes of limitations and prohibitive burdens of proof. With the odds so strongly stacked against him, the U.S. creditor lost and also paid our client’s legal fees.

Second, the trust was impenetrable because distributions to the U.S. client were completely discretionary by the Liechtenstein trustee. This was the basis for the appellate court’s ruling that the U.S. client had no claim to trust assets. This demonstrates that for effective offshore asset protection, the U.S. client must part with legal control of the assets. However, the trust assets will still be protected and guarded by licensed, bonded, qualified and reputable trustees who will, in fact, be sympathetic to the client’s needs and wishes.

Third, clients who protect their assets offshore must still disclose those assets, and all gains thereon, to the IRS. Clients cannot expect their assets to be “hidden” – neither from their creditors nor from the IRS. The assets will be protected offshore, but taxes are still due and reporting requirements must be met in order for the asset protection to be effective.

Finally, this case demonstrates that offshore asset protection is very much alive and 100% effective, provided that it is done properly and tax compliantly. “Hiding” assets does not work; “protecting” assets does.

Antigua Asset Protection Laws Drafted by Rubinstein & Rubinstein Become Effective
 

New York, NY – January 26, 2009 — On January 17, 2009, the Antigua International Trust Act, International Foundations Act and International LLC Act, having earlier been passed by the Parliament of Antigua & Barbuda and signed by the Governor-General, were published as law in Antigua’s official gazette, thereby becoming effective The publication of the advanced asset protection, trust and foundation laws, which were drafted by the New York law firm of Rubinstein & Rubinstein, LLP, firmly establishes Antigua and Barbuda as the premier jurisdiction for international asset protection and asset security in the world.

The new laws make it nearly impossible for foreign creditors to reach assets protected by Antiguan trusts or foundations. A creditor must first win a foreign judgment, then re-litigate the claim anew in Antigua and pay a fee to the Antiguan court. Contingency fees are not permitted. The new laws include very short statutes of limitations, which only allow the creditor to file a claim within two years from the original cause of action or one year from execution of the trust or foundation instrument. The new laws also create an arduous standard of proof, which limits a creditor’s ability to prove fraudulent conveyance claims.

The new laws also contain strong protections against asset repatriation, along with anti-alienation and spendthrift provisions, which prevent foreign courts and creditors from reaching assets protected in Antigua. According to Kenneth Rubinstein, the New York attorney who drafted the legislation, unlike any other jurisdiction, anti-duress provisions are explicitly built into the Antiguan statutes, prohibiting an Antiguan trustee from honoring any request made pursuant to foreign court order or other compulsion. This provides a clear defense of impossibility to any threatened contempt citation. These laws also do not recognize foreign marital rights or forced heirship rights, which ensures that only specifically designated beneficiaries will receive assets.

The new laws balance regulation of trust and corporate service providers with tight confidentiality and absolute asset protection. Antiguan trustees and corporate service providers are carefully regulated by the government of Antigua, and are insured and bonded, which ensures client security and protection. At the same time, Antiguan trustees and corporate service providers are prohibited from disclosing any information about trust, foundation or corporate activities and assets, except pursuant to treaties covering government investigation of serious crime. Unlike in Switzerland, the Cayman Islands and other once-confidential jurisdictions, Antigua now offers the highest level of international confidentiality.

The Antiguan laws offer the world’s most secure and confidential environment for international asset protection, wealth preservation and tax minimization.

For more information about Rubinstein & Rubinstein’s legal services, including domestic and international asset protection, wealth preservation and tax planning, please visit www.AssetLawyer.com.

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Contact:

Kenneth Rubinstein, Esq.
www.AssetLawyer.com
212-888-6600
Rubinstein & Rubinstein, LLP
18 East 48th Street, New York, NY 10017

MEMORANDUM

To: Clients and Colleagues

Date: 26 January 2009

Subject: Your Ability to Discount the Value of FLP Gifts May Be Eliminated Soon
 

On January 9, 2009, Rep. Earl Pomeroy (D-ND) introduced a Bill (HR 436) in Congress which, if passed, would eliminate your ability to discount the value of family limited partnership interests (or interests in any entity – corporation, LLC, etc.) that are transferred. The Bill explicitly prohibits discounts for minority interest or lack of control where the receiver of the limited partnership interest (or other entity interest) and his/her other family members together have control of the partnership (or entity). This provision of the Bill would become effective as of the date of its enactment. The Bill has been referred to the House Ways and Means Committee. We believe there is a significant likelihood that this Bill will be passed by Congress and signed by President Obama in the near future.

Each of you currently has the right to give $1,000,000 free of gift tax. A gift of $1,000,000 worth of limited partnership interests may, under current law, benefit from discounts in the value of those limited partnership (LP) interests because they are minority interests and do not give the recipient control of the partnership. Such discounts may reduce the value of the LP interests by as much as 50%, thereby enabling you to give away twice as many LP interests with the same $1,000,000 gift. For example, if the partnership assets are worth $2,000,000, a gift of $1,000,000 of LP interests would get 50% of the partnership out of your estate (although you continue to control the partnership and all of its assets as general partner). With a 50% discount in the value of the LP interests, the same $1,000,000 gift of LP interests removes 100% of the partnership from your estate (although you still maintain control as general partner). Thus, for a married couple, gifting of LP interests at discounted values has been an easy and effectively way of decreasing their taxable estate by up to $4,000,000, while still maintaining control of the assets in their partnership. HR 436 will soon eliminate this valuable estate planning tool.

Many of you have either not made any gifts of LP interests at all or have only made $12,000 gifts. These $12,000 gifts have no relation to the $1,000,000 gift discussed above. We encourage you to consider making a $1,000,000 gift of LP interests ($2,000,000 for a married couple) at discounted valuations now, before this valuable estate planning tool is eliminated. Gifting at this time would also take advantage of current depressed asset values, allowing for even greater partnership percentages to be removed from your estate.

Gifting LP interests will require:

1. Determination and documentation of the current value of partnership assets;

2. Preparation of Memorandum of Gift;

3. Calculation of valuation discounts and percentage of partnership transferred via gift;

4. Preparation of calculation letter;

5. Preparation of IRS Form 706 (Gift Tax Return – There will be no gift tax, but the return is necessary in order to claim exemption from gift tax).

HR 436 also eliminates the unlimited federal estate tax exemption that was supposed to become effective January 1, 2010 and instead establishes a permanent $3,500,000 estate exemption. It also establishes a permanent federal estate tax of 45% on estates up to $10,000,000 and 50% on estates greater than $10,000,000. The above would be in addition to any applicable state inheritance tax.

Please note that HR 436 has no impact whatsoever on the asset protection aspects of family limited partnerships.

To discuss utilizing your discounted gifting opportunities before they are lost, please call us at 212.888.6600 or e-mail us at krubinstein@assetlawyer.com.

Step One: Protect What You Have Left

To paraphrase an ancient Chinese curse, we live in interesting times. Indeed, it may be appropriate to abandon subtlety and state that we live in dangerous times. Many of us are experiencing significant loss of income as a result of either unemployment or reduction of business revenue. Those of us who are not yet in this position have seen it happen to neighbors, friends or colleagues. We are, or should be, afraid that this could happen to us. We have all suffered serious depreciation of our investment assets. Our homes are devalued, our retirement plans are decimated and our nest egg is shrinking daily, with no end in sight.

There is no shortage of financial planners and investment managers eager to offer free advice in these troubled times: “Buy Low”, “Hoard Cash”, “Invest in Bonds”. Yet, all of these advisors ignore the first, most obvious and most important piece of advice: PROTECT WHAT YOU HAVE LEFT!

Now is the time for each of us to adopt a plan to protect our current assets from threats that may arise as a result of further financial deterioration. If we lose our jobs, if our income further declines, if our savings vanish: Will we be able to pay all of our debts? Will we go further into debt? Could we lose our assets? Could we get sued?

Although asset protection strategies may be adopted at any time, such strategies are most effective and least expensive when they are adopted early, while all debts are current. Consider transferring assets to legally protective entities like family limited partnerships that will, in effect, erect “bullet-proof shields” around your home and other assets. Consider moving your nest egg to a safer jurisdiction — one where banks have not failed and where the black plague of sub-prime mortgages and credit default swaps has not reached.

Whatever financial strategies you chose to follow, your fist step should be a legal strategy: PROTECT WHAT YOU HAVE LEFT through timely, legal asset protection.

For advice regarding legal asset protection strategies, contact Rubinstein & Rubinstein, LLP., at www.assetlawyer.com, or (212) 888-6600

Madoff Victims Need To Protect Recouped Assets

In the midst of their misfortune, some Madoff investors have achieved some small mitigation of their losses through the receipt of periodic profit distributions or the partial return of capital prior to the Madoff fund’s implosion. However, these Madoff investors will likely suffer insult on top of injury, as even these meager assets may soon be taken from their victimized owners. Madoff bankruptcy trustees will almost definitely seek to “clawback” these distributions from their owners as preferential transfers, under the U.S. Bankruptcy Code.

The rightful owners of these assets need to seek the immediate protection of their assets from the inevitable clawback attempts, by placing those assets into protective entities. Strategies exist that will protect assets from the reach of bankruptcy trustees and also withstand the scrutiny of U.S. courts. Successful, legally sound strategies may even serve to discourage clawback attempts, thereby minimizing litigation costs.

Such strategies involve the conversion of assets from “non-exempt” to “exempt” status under bankruptcy law. If such strategies are undertaken for other valid reasons — not purely for asset protection purposes — even if asset protection is a by-product, they are likely to be sanctioned by U.S. courts and withstand clawback attempts.

For advice regarding legal asset protection strategies, contact Rubinstein & Rubinstein, LLP., at www.assetlawyer.com, or (212) 888-6600

 On The Trail of Madoff’s Money

By Kenneth Rubinstein, Esq. and Asher Rubinstein, Esq.

 As attorneys experienced in asset protection law and especially in the area of offshore asset protection, we have recently been asked to suggest where Bernie Madoff may have secreted the proceeds of his allegedly gigantic and pervasive financial fraud.

 At the outset we must declare that we do not represent (and have not represented at any time) Bernie Madoff or, to the best of our knowledge, any member of his family or organization, or any victim of his alleged fraud; nor do we have any personal knowledge concerning the nature, extent or location of Mr. Madoff’s assets. This article is based on our opinions, assumptions and conclusions drawn from our detailed knowledge of offshore asset protection jurisdictions, their laws, court systems, banking infrastructure and international treaties, protocols and agreements.

 The first step in our analysis requires that we make certain assumptions as to the nature and size of Bernie Madoff’s assets. The nature of the assets will determine whether they are likely situated in the U.S. or offshore. The size of the assets would suggest the elimination of many lesser offshore jurisdictions as possible secure havens.

 Logic compels us to assume that the Madoff assets are highly liquid and located offshore. If the assets were held in U.S. banks or invested in U.S. real estate, U.S. businesses or U.S. securities, the risk of discovery would be very high. In the event of their discovery, they would be subject to immediate restraint and seizure. Indeed, the mere suspicion that any asset may be somehow related to Bernie Madoff would be sufficient for a U.S. court to order the restraint of that asset. U.S. bank records are subject to subpoena by prosecutors and even by civil creditors. Our systems of recording and registration of real property and securities also place such U.S. assets at significant risk of discovery and, if discovered (or even suspected) at significant risk of restraint.

 It is axiomatic that the only assets that lend themselves to safe, efficient and absolute transfer offshore are assets which are purely liquid – cash, via wire transfer. Deeds, stock certificates and other documents representing ownership of U.S. assets are just that – representations of ownership. The underlying U.S. assets would still be subject to restraint and seizure by U.S. courts. Deeds and stock certificates could be declared void and sheriff’s deeds and new certificates could be issued by court order. We must therefore assume that, in order to avoid such risk of discovery and restraint, Bernie Madoff’s assets are predominantly liquid and offshore.

 The assets lost to Bernie Madoff’s alleged fraud have variously been estimated to range from twenty billion to fifty billion dollars (although at least one commentator has stated the loss to be as high as one hundred billion dollars). For purposes of this analysis, let us assume that the majority of these assets were, in fact, lost through investment failure during the current financial crisis. For many years prior to the current crisis, Mr. Madoff claimed to generate annual net profits of at least twelve percent. If we accept the more conservative estimates of twenty billion dollars under management, such profits, at a twelve percent return, would equal $2.4 billion per annum. If Mr. Madoff received only half of the usual hedge fund manager’s twenty percent incentive fee, he would have received $240 million dollars (ten percent of $2.4 billion) per year. This would be in addition to commissions on trades and other fees and charges. Bernie Madoff has claimed twelve percent net profits per annum for decades. Thus, based upon the above conservative assumptions, Mr. Madoff has probably amassed at least $2.4 billion dollars in personal profits over just the last ten years, and very likely much, much more.

 Where could Bernie Madoff safely store billions (or even hundreds of millions) of dollars? Although dozens of offshore financial havens exist throughout the world (they prefer to be called “international financial centers”), very few are equipped to receive or hold deposits of this magnitude. For most, an influx of deposits of this size, even if gradual, would seriously skew the banking infrastructure and would attract the attention of local and international regulatory authorities (e.g., local central banks, monetary authorities, IMF, FATF, etc.). It would be an understatement to say that such an influx of deposits could not remain invisible. Equally important, in most of these offshore jurisdictions the banks and other financial institutions could not possibly offer Mr. Madoff any reasonable degree of security regarding the safety of such large deposits. For this reason, we can eliminate foreign countries that, although they might welcome Madoff Money, would offer no security or stability, countries like Cuba or Ukraine. Although Kobi Alexander, who fled charges of conspiracy and securities fraud while CEO of Comverse Technology, escaped to Namibia where he remains a fugitive, it is unlikely that Madoff stashed assets in any African country.

 Mr. Madoff could have established his own bank in one of these offshore centers, but such bank would still be subject to the aforementioned regulation and scrutiny, and its (Mr. Madoff’s) deposits would still be vulnerable to the jurisdiction’s economic and financial stability. $2.4 billion on deposit in a country whose total G.D.P. is one or two billion dollars would hardly be inconspicuous.

 We may reasonably conclude, therefore, that all but the largest offshore havens can be eliminated. This narrows our focus to London, Tokyo, Hong Kong, Cayman, Switzerland, Liechtenstein, Luxembourg, Austria, Bermuda, Monaco, Israel and Dubai.

 Each of these jurisdictions offer depositors the security of a substantial banking infrastructure and, more importantly, the promise of bank secrecy. This bank secrecy is based either on statute or on tradition. However, in almost every case such bank secrecy is not absolute; it may be preempted by international treaty or agreement between governments.

 Almost every country in the world has entered into a mutual legal assistance treaty (MLAT) with the U.S. These treaties require the disclosure of financial information in connection with specific investigations of serious crime. Mr. Madoff’s alleged fraud would certainly constitute a serious crime in every jurisdiction subject to such MLAT. In addition, some offshore centers have also signed separate agreements with the U.S. Treasury Department requiring the exchange of financial information in response to IRS administrative requests. Most recently, in December 2008, Liechtenstein, which was already subject to an MLAT, signed an additional tax information exchange agreement with the IRS. In jurisdictions subject to these tax information exchange agreements, a simple IRS request for bank information in connection with a civil audit of Bernie Madoff would override any provision of bank secrecy.

 One commentator has suggested (without support) that because Mr. Madoff is Jewish, he has hidden his assets in Israel. This suggestion has no credibility because Israel is subject to an MLAT with the U.S., has a long and consistent record of recognizing and enforcing U.S. judgments against Israeli assets and has repeatedly refused to provide refuge to U.S. (Jewish) fugitives and their assets (e.g., Meyer Lansky of Mafia fame and Eddie Antar of Crazy Eddie fame).

 Of the substantial offshore financial centers listed above, all but one is subject to an MLAT and/or a tax information exchange agreement with the U.S.. Mr. Madoff would be foolish to hide any significant assets in any of these MLAT jurisdictions.

 Only one of the above-listed offshore havens has a strict bank secrecy law and has no treaty or other agreement with the U.S. requiring financial disclosure – the Principality of Monaco. Although several other countries may also offer absolute bank secrecy due to the absence of an MLAT (e.g., Cuba, Andorra, some lesser African countries), none of them contain a sufficiently safe and significant financial infrastructure. The only country in the world that can offer Bernie Madoff complete bank secrecy together with a large, well-established and secure financial infrastructure (total deposits under management as of December 31, 2008: approximately $120 billion) as well as the security of political, social and economic stability, is Monaco. Does our Attorney-General speak French?

In an article by Matthew Smith for the Dec. 11 edition of WealthBriefing, Asher Rubinstein was quoted concerning the imminent change of the rules of disclosure in Liechtenstein:

The agreement reached by the US and Liechtenstein governments will put pressure on the Switzerland government to forge a similar pact, which could in-turn accelerate the UBS tax evasion investigation, according to US tax attorneys.

Liechtenstein said it would grant US tax authorities access to information kept by its banks on US citizens in certain cases of tax evasion, effectively ending the distinction between tax fraud and tax evasion in the country.

Neighbouring offshore giant Switzerland has not agreed to a similar agreement, but could now be under pressure to make a pact with the US government, said Manhattan based attorney and Rubinstein & Rubinstein partner, Asher Rubinstein.

The US Department of Justice and the Internal Revenue Services are currently investigating whether certain US clients sought to evade their US tax obligations with the assistance of UBS client advisors as part of an ongoing investigation.

Press reports have recently included Credit Suisse and HSBC in the same investigation.

If Switzerland signs an agreement similar to the Liechtenstein agreement, the US government is likely to come closer to prosecuting people currently in their sights for avoiding US taxes.

“The basis of the Liechtenstein pact is the US can request information for specific people – they can’t just go on a fishing expedition and ask for the names of all US taxpayers who have offshore bank accounts – they need to have predetermined people they are interested in,” Mr Rubinstein said.

“There is no doubt this agreement now puts the pressure on the Swiss government to do the same,” he added.

UBS is said to have handed on a “small group” of names who were clients with the firm’s now defunct US cross-border business that were likely to be of “potential interest” to US authorities as part of their ongoing investigation, people close to the firm have said.

UBS could not offer up its clients’ information to US authorities without breaching Swiss law, even though US authorities requested the information, a UBS spokeswoman confirmed.

“Under Swiss law, UBS cannot turn over Swiss-based client data to US – or other foreign government – authorities,” the spokeswoman said.

“Pursuant to a Switzerland-US treaty, such matters must go through an ‘administrative assistance’ process. The administrative assistance proceedings are a matter between the relevant domestic and foreign authorities and the UBS clients concerned,” UBS said in a statement to WealthBriefing.

Peter Hardy, a partner with Philadelphia based law firm Post & Schell who represents UBS clients in the matter, estimates there are “several dozen” US attorneys representing the interests of individuals who held accounts with UBS’ cross boarder business.

“There is no lawyer I know who will counsel their client to do an evasive act, but by liquidating their accounts, UBS has put these people in a bad position, even those with the desire to come clean,” Mr Hardy said.

In August UBS sent a letter to its clients US offshore-banking clients advising them to respond within 45 days to discuss the transfer of their account holdings.

“Secret” Offshore Accounts Targeted By I.R.S.,

But There Are ways to Limit Risk

New York, NY – December 8, 2008 – The I.R.S. today signed an agreement with the government of Liechtenstein whereby Liechtenstein will exchange information pursuant to I.R.S. audits. At the same time, the current legal challenges against UBS, HSBC and Credit Suisse for aiding tax fraud have placed U.S. owners of undisclosed “secret” foreign bank accounts at serious risk of I.R.S. prosecution. This is especially true for U.S. owners of Swiss accounts. Beneficial owners of undisclosed foreign accounts must therefore give immediate consideration to minimizing the risk of I.R.S. prosecution for tax fraud.

One way to limit the risk of prosecution is to convert a non-compliant offshore account into a tax compliant structure. Offshore strategies exist which can accomplish significant asset protection and tax minimization, and which are completely legal and tax-compliant. Although taxpayers cannot undo a non-compliant past, they can ensure full compliance going forward. Such steps may significantly reduce the chance of prosecution for previous violations.

A second strategy is the voluntary disclosure of your interest in a non-compliant offshore account before the I.R.S. discovers it. Qualified legal counsel can approach the I.R.S. on a hypothetical “no-name” basis, demonstrate proper current compliance, and negotiate on your behalf to prevent criminal prosecution and possibly reduce fines and penalties for past non-compliance.

The quickest and best way to bring a non-compliant account into compliance, as well as minimize the risk of I.R.S. discovery of prior non-compliance, utilizes the agreement signed today with Liechtenstein. The agreement requires Liechtenstein to share information with the I.R.S. with respect to specific administrative investigations (audits) covering tax year 2009 onward, but not earlier. This means that if a non-compliant Swiss account, for example, is closed and the funds sent to a compliant Liechtenstein account before December 31, 2008, in the event of an investigation, Liechtenstein will only share with the I.R.S. 2009 information on the compliant account. Obviously this option requires immediate implementation.

Beneficial owners of undisclosed foreign accounts must evaluate their options and take immediate steps to minimize the risk of I.R.S. prosecution for tax fraud. Failing to remedy a non-compliant offshore account puts you at serious risk of harsh penalties, including I.R.S. criminal prosecution, in the event of discovery. As recent events have proven, discovery is very likely.

Rubinstein & Rubinstein’s attorneys have a wealth of experience dealing with offshore accounts and associated U.S. reporting requirements, as well as structuring tax compliant offshore strategies and representation before the I.R.S. For more information about Rubinstein & Rubinstein’s legal services, including asset protection, wealth preservation and tax planning, please visit www.AssetLawyer.com.

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Contact:

Asher Rubinstein, Esq.

Rubinstein & Rubinstein, LLP

18 East 48^th Street, New York, NY 10017

www.AssetLawyer.com

212-888-6600

arubinstein@assetlawyer.com