UBS Betrayed its Customers in Tax Case

Zurich based UBS the largest Swiss bank, acquired customers from all over the world, on the promise that their information would be protected and kept secret. The U.S. Justice Department filed a criminal case against UBS AG, that the bank conspired to defraud the U.S. by helping 17,000 Americans to evade taxes hiding money from the Internal Revenue Service.

To avoid prosecution, UBS broke the veil of Swiss bank secrecy to its loyal customers and admitted to the charges by U.S. Justice Department. UBS paid US$780 million, admitted helping tax evasion from 2000 to 2007 and handed over data on more than 250 U.S. clients. UBS later turned over information on additional 4,450 US account holders.

UBS signed an agreement with the prosecutors to end its cross-border business and co-operate with the U.S. government and identify the American account holders. With this agreement UBS avoided the prosecution and U.S. dropped the criminal case against UBS.

This agreement raises a serious question about the loyalty of corporations to its customers. Swiss banks are known for the protection of their customer’s information. If they fail to perform their duty to their customers, should the customers bring legal action against the corporation?

The Bank do not have the information if taxes were paid or not on the deposit of account holders. Out of 17,000 US account holder, I wonder how the bank decided to turn over selected account for tax evasion to the U.S. government.