(Bloomberg) The Internal Revenue Service is seeking to force UBS Group AG to turn over records on an account in Singapore held by a U.S. citizen, potentially opening a new front against offshore tax evasion beyond Switzerland.
The IRS last month asked a federal judge in Miami to force UBS, the largest Swiss bank, to produce documents on Ching-Ye Hsiaw, who lives in China. The judge on Wednesday told UBS to show up in court on March 31 to explain why it has refused to supply the account records.
“They’re holding UBS hostage in the U.S. by saying you subjected yourself to U.S. jurisdiction, now produce these records outside the U.S.,” said Jeff Neiman, a former federal prosecutor. “It’s setting up a showdown of Singapore secrecy versus the U.S. need to enforce its tax laws.”
Singapore will lift banking confidentiality when foreign authorities ask it to do so and when the law is used to shield criminal activities, according to a person with direct knowledge of the city-state’s bank-regulation framework who asked not to be named because of an ongoing court case.
“No jurisdiction is off limits,” Acting Assistant Attorney General Caroline D. Ciraolo, who oversees the U.S. Justice Department’s Tax Division, told the Federal Bar Association in a speech Friday. She said “our investigations of both individuals and entities are well beyond Switzerland at this point.”
UBS spokesman Gregg Rosenberg declined to comment on the case. Hsiaw couldn’t be reached for comment.
The U.S. has focused largely on Switzerland in recent years as it has fought offshore tax evasion. More than 80 Swiss banks, including UBS and Credit Suisse Group AG, have agreed to pay a total of $5 billion or so in penalties and fines. The question is where the IRS and the Justice Department will turn next as they sift through a trove of data gathered from Swiss banks and from more than 50,000 U.S. taxpayers who disclosed their accounts to avoid prosecution.
The Hsiaw case provides some clues. IRS agents served a summons on UBS in 2013 for records of his account in Singapore from 2001 to 2011. The bank said it couldn’t produce them because Singapore’s bank secrecy laws prevent disclosure without permission from Hsiaw, which he hasn’t provided, according to a court filing.
“Even if Singapore’s bank secrecy laws, as UBS contends, precludes disclosure of the summoned bank records relating or pertaining to Hsiaw’s Singapore account(s), international comity requires that the records be disclosed,” IRS revenue agent James Oertel said in the filing.
Neiman, the former prosecutor, said that “UBS can be held in contempt if they don’t produce the records. I think it’s the IRS’s way to start getting at Singapore.”
Singapore is prepared to help in foreign criminal proceedings by sharing banking information through established channels, the person with knowledge of its bank regulations said.
Neiman was one of the prosecutors on a landmark case in 2009, filed in Miami, in which UBS avoided prosecution by paying $780 million, admitting it encouraged tax evasion, and agreeing to turn over secret account data on U.S. citizens. As part of the settlement, UBS provided information on Hsiaw’s Swiss account, along with about 4,500 others.
The case is U.S. v. UBS, 16-mc-20653, U.S. District Court, Southern District of Florida (Miami).
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