Kenneth Rubinstein was interviewed by Forbes regarding strategies to address non-compliant offshore accounts at UBS: convert to a tax-compliant offshore strategy, or preemptively disclose the account to the IRS.
UBS Clients Prepare For The Worst
Vidya Ram , 02.27.09, 2:00 PM ET
UBS has pledged to fight against the Internal Revenue Service’s demand that it spill details of 52,000 clients suspected of having secret Swiss bank accounts. But its clients are preparing for the worst.
Some clients are already beginning to approach the IRS under its voluntary disclosure program. “We have been going to the IRS without giving names and explaining we represent the clients, to get assurances from the IRS that if they come forward and declare those assets they will not be prosecuted criminally,” says lawyer Ken Rubinstein, of New York-based Rubinstein & Rubinstein. “Unless they already have the client’s name, the IRS is agreeing to treat it as a civil matter.” Several other clients are converting their foreign accounts that aren’t compliant with U.S. law.
UBS pledged to dig its heels in and not hand over the details of the clients, a day after it reached a settlement to pay a $780.0 million fine to U.S. authorities and release details of clients suspected of tax
fraud — estimated to be around 250, according to Swiss press reports. (See “52,000 Had Secret UBS Accounts.”)
That settlement has already put UBS in hot water: On Wednesday, a criminal case was filed against the company, Chairman Peter Kurer and the Swiss regulator for violating the country’s banking secrecy laws – a charge that the bank deems “without merit.”
The Swiss President Pascal Couchepin had defended the decision to hand over the details of those 250 clients, warning that UBS’ existence would have been threatened had it been indicted. For Switzerland, the fate of that bank matters enormously: UBS and Credit Suisse’s balance sheets total around seven times Switzerland’s gross domestic product, while their revenues amount to just under 9.0% of GDP.
Rubenstein, who has been advising clients either to convert their accounts or pre-emptively disclose to the IRS, believes that that economic threat will force UBS and the Swiss authorities to comply with U.S. demands. “My prediction is that the details of the 52,000 will be handed over for pragmatic reasons,” he said. “They will have to capitulate.”