swiss bank

Senior Vatican Cleric Arrested in Money Smuggling Case

June 28, 2013 by NewsMaker Leave a Comment

Monsignor Nunzio Scarano, 61, who worked as a senior accountant in the Vatican’s financial administration, was arrested along with an Italian secret service agent and a financial intermediary in a tale that reads like a spy novel.

It involves police wiretaps, a private plane rented to collect the cash from Locarno, burned cell phones and an allegedly corrupt secret services agent who promised to get the money past customs.

Details of the case against Scarano will come as an acute embarrassment to Pope Francis, who, since his election in March, has pointedly eschewed many of the trappings of office and sought to stress the importance of a simple life of devotion.

Only two days ago, the Vatican announced he had set up a commission of inquiry into the Vatican bank, formally known as the Institute for Works of Religion (IOR), which has been hit by a number of scandals in the past decades.

Scarano, who was arrested in a Rome parish and taken to Rome’s Queen of Heaven jail, had hatched a plot to bring up to 40 million euros (34 million pounds) into Italy for a family of shipbuilders in his hometown of Salerno in southern Italy, magistrate Nello Rossi told reporters.

Rossi is already investigating the Vatican bank for money laundering, and the latest arrests stemmed from that.

Rossi and fellow magistrate Stefano Pesci said there was no indication so far that the bank was directly involved in the attempt to bring the money into Italy, but that the investigation was continuing and more searches were underway.

Scarano is under separate investigation in southern Italy in relation to his accounts in the Vatican bank.

CELL PHONES DESTROYED

According to Rossi, in July last year Scarano engaged Giovanni Zito, a paramilitary Carabiniere policeman on loan to the secret services, to help him get the money, which was in a Swiss bank, into Italy without tax and customs controls.

The third person arrested was Giovanni Carenzio, a financial broker with offices in Switzerland and the Canary Islands and who was acting as the fiduciary for the owners of the money.

It was not clear how or when the money got to Switzerland in the first place.

The three originally planned to bring back 40 million euros in cash but later reduced it to 20 million euros. A private plane went to Locarno from Rome and waited several days before returning to Rome without the money.

The cash never left Switzerland because of disagreements and nervousness among the three, Rossi said, adding that cell phones that were used were later destroyed by being burned.

Zito had promised to use his position in the secret services to avoid customs controls. The plane was to have been met on the runway of a Rome airport and the cash taken under armed escort to Scarano’s home in Rome, Rossi said, calling the plot “intricately planned”.

Even though the money never left the Swiss bank, Zito, who is now in a military prison, demanded the payment he had been promised for his services.

Scarano gave Zito two checks, one for 400,000 euros and another for 200,000 euros. Zito cashed the first check but Scarano blocked the second before Zito could cash it by filing a false report that it had been lost.

VATICAN READY TO COOPERATE

Asked if money laundering was involved, Rossi said that would depend if the continuing investigation determined that the original source of the money was criminal activity.

“We are trying to determine the origin of the vast amount of money that was at the disposal of Scarano, who is the holder of several accounts at IOR,” Rossi said.

Vatican spokesman Father Federico Lombardi said Vatican authorities stood ready to cooperate with the Italian investigation, but had so far received no official request.

He said the FIA, the Vatican’s own financial intelligence authority, was following the case and would take action if necessary.

Rossi said his office would seek permission from the Vatican, which is a sovereign state, to question officials. “This is just a piece in a much larger mosaic,” he said.

Scarano, who Rossi said had worked for a German bank before he became a priest, was for years a senior accountant for a Vatican department known as APSA, whose official title is the Administration of the Patrimony of the Apostolic See.

He was suspended from his duties several weeks ago when he was placed under investigation by magistrates in Salerno.

In that investigation, his lawyer Silverio Sica said wealthy friends had donated money to Scarano in order for him to build a home for the terminally ill.

According to Sica, his client wanted to use that money to pay off his mortgage so he could sell a property in Salerno and use the proceeds to build the care home.

Apparently to cover his tracks, Scarano has been accused of taking 560,000 euros in cash out of his account in the Vatican bank and giving various amounts to friends who gave him checks in exchange. He then deposited the checks into an Italian bank account to pay off the mortgage.

“Scarano was able to use the bank for his personal reasons” Rossi said.

(Additional reporting by Antonella Cinelli and James Mackenzie, Editing by Mike Collett-White)

Article source: http://www.nytimes.com/reuters/2013/06/28/business/28reuters-vatican-bank-arrests.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: magistrate, rome parish, swiss bank

Deal to Cut Bank Secrecy Stalls in Swiss Parliament

June 19, 2013 by NewsMaker Leave a Comment

Switzerland’s Parliament on Wednesday scuttled an information-sharing agreement with the United States that the Swiss government had hailed just weeks ago as a breakthrough in a dispute over banking secrecy, but left open the possibility for another solution.

The Swiss government said in late May that it would let banks hand over data on American clients’ hidden accounts without violating the country’s bank secrecy laws. The move was meant to help Swiss banks head off the possibility of criminal prosecution for helping Americans evade taxes.

But the proposal proved contentious in a country that has long prided itself on the discretion of its bankers, and it failed to gain the necessary support.

Some members of Parliament raised concerns about the precedent that any such agreement might set at a time when Switzerland’s banking secrecy is also under attack from the European Union — of which the country is not a member. They also complained that the terms were not fully revealed and that the Swiss federal authorities were pushing Parliament to pass the deal by Friday, to go into effect July 1.

The Parliament did signal its willingness to find an alternative. Eveline Widmer-Schlumpf, the Swiss finance minister and president of the governing Federal Council, said in a statement that the government “will do all it can within the scope of its legal powers to allow the banks to resolve the tax dispute.”

The Swiss news service Agence Télégraphique Suisse said Ms. Widmer-Schlumpf had urged Parliament to let banks take the United States up on its offer. “Washington knows no forgiveness,” she told legislators.

The Swiss have been working to assuage officials in Washington since 2009, when UBS settled with federal authorities in a tax evasion case. UBS, the largest Swiss bank, paid a $780 million fine and agreed to hand over 4,450 client names to resolve accusations that it helped wealthy clients avoid taxes.

The Justice Department has since begun investigations into a dozen Swiss banks. One bank Wegelin Company, which was indicted, ceased operations.

The failure of the bill Wednesday could prompt Washington to take new action against Swiss lenders.

The Swiss Banking Association said in a statement that it “regretfully takes note” of Parliament’s decision, saying that such a law would have been the best means for helping banks “make use of the U.S.’s program in order to draw a line under the past.” The group called on the Swiss Federal Council “to assume its responsibility and do everything in its power to ensure that a legal framework is created that nevertheless renders the implementation of the U.S. program possible.”

The consequences of the rejection “are incalculable,” the banking association added. The Justice Department declined to comment.

There is wide recognition in Switzerland that a deal with Washington is essential to wipe the slate clean. Actual client data would not have been turned over, but authorities in the United States could have made use of the information to track down tax cheats. Critically, in a country where disclosing such information violates the law, bank employees would have been protected under the proposed deal.

Article source: http://www.nytimes.com/2013/06/20/business/global/swiss-parliament-scuttles-us-deal-on-bank-secrecy.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: secrecy laws, swiss bank, swiss government

DealBook: France Expands Tax-Evasion Inquiry Involving UBS

June 7, 2013 by NewsMaker Leave a Comment

Michael Buholzer/ReutersUBS said it was working with authorities in France to arrive at a resolution.

8:41 a.m. | Updated

PARIS – UBS, the biggest Swiss bank, is the target of a widening tax-evasion investigation in France, a spokeswoman for the Paris prosecutor’s office said on Friday, an indication that the lender’s problems with the French government are growing.

A French judge on Thursday placed UBS AG, the Swiss parent company, under formal investigation on suspicion that it illegally sold banking services to French citizens that helped them to set up secret accounts abroad, according to Agnès Thibault-Lecuivre, the spokeswoman for the Paris prosecutor’s office. The Swiss bank also was identified as an ‘‘assisted witness,’’ a less serious status, in a concurrent investigation of suspected money laundering and tax evasion, she said.

The expanded inquiry comes just a week after the bank’s local subsidiary, UBS France, was put under formal investigation on similar suspicions. In the French legal system, a formal investigation, sometimes compared to an indictment in the American system, can drag on for years, and does not necessarily lead to charges or trial. An assisted witness is required to answer prosecutors’ questions with a lawyer present, but is thought less likely to ultimately face charges.

Yves Kaufmann Lobato, a UBS spokesman in Zurich, sought to play down the significance of the latest development, noting that the investigation had been the subject of news reports since early last year.

‘‘We will continue working with the authorities in France within the applicable legal framework to arrive at a resolution to this matter,’’ he added, citing a bank statement.

The investigators are examining the question of whether bankers from the Swiss parent company broke a French law against “illicit solicitation” by actively approaching potential clients in France.

According to a report on Friday in the French newspaper Le Monde, UBS bankers regularly sought to ingratiate themselves into networks of affluent people, mingling at sporting events and concerts in order to seek out possible clients for tax evasion. At least 353 French citizens suspected of evading taxes through UBS have been identified, and the French government has sought administrative assistance from the Swiss government in four cases, the newspaper reported, without citing its source.

Mario Tuor, a spokesman for the Swiss Federal Finance Ministry in Bern, declined to comment on the case, saying the details were confidential.

The expanded French investigation comes amid a broad push in the United States and Europe to stop offshore banks from aiding tax cheats. Switzerland – where the secrecy laws punish banks for revealing client data – has been in an uncomfortable spotlight. In France, President François Hollande has made a crackdown on tax evasion a top priority after his former budget minister, Jérôme Cahuzac, was found to have set up secret Swiss and Singapore accounts to hide some of his wealth.

UBS itself has been under international scrutiny since 2008, when the United States Justice Department threatened to indict it for conspiracy to defraud the Internal Revenue Service. UBS eventually agreed to pay a $780 million fine to avoid prosecution, and turned over data on 4,450 client accounts held by suspected American tax evaders.

Obama administration officials followed that case with a broad push to expose all the American accounts hidden behind Swiss banking secrecy laws. With about a dozen Swiss lenders facing the possibility of indictment in the United States, the Swiss government agreed last month on a framework for banks to hand over information on American clients, a deal it hoped would permanently end the threat of United States prosecution. That agreement still must be approved by the Swiss legislature.

UBS said on Friday that it ‘‘fully supports the strategy of Switzerland to limit itself to the management of declared assets.’’

‘‘We believe that Switzerland and the countries of the E.U. need to find a solution for the past,’’ according to a statement from the bank. ‘‘This is an industry issue that UBS has taken significant steps to resolve since 2009. UBS does not tolerate any activities intended to help its clients circumvent their tax obligations.’’

Article source: http://dealbook.nytimes.com/2013/06/07/ubs-under-investigation-for-tax-evasion-in-france/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: french citizens, money laundering, swiss bank

France Puts UBS Under Investigation for Aiding Tax Evasion

June 2, 2013 by NewsMaker Leave a Comment

New York — A unit of the Swiss bank UBS has been placed under formal investigation in France following allegations that it designed investments to help its clients evade taxes.

The move comes more than a year after an inquiry was opened regarding the bank’s operations in France, a UBS executive briefed on the matter said Sunday. A handful of UBS executives have been put under investigation since the inquiry began in 2012.

UBS has been dogged for years by regulators who allege that it has helped wealthy individuals dodge taxes, and has successfully settled some of these charges. For instance, the bank agreed to a $780 million fine in 2009 with the U.S. authorities to settle charges that it had helped its American clients to hide funds.

But other countries continue to pursue their own cases against UBS. The executive, who was not authorized to speak on the record, said that while the decision was disappointing for the bank, it was not unexpected.

Several media outlets reported news of the investigation into UBS in recent days.

Tax evasion and avoidance is a hot topic right now as big companies like Apple find themselves denying allegations that they have avoided paying millions of dollars in taxes.

The issue is particularly prickly in France, in part because the country’s former budget minister, Jérôme Cahuzac, admitted to having stashed funds in an undeclared bank account in Switzerland.

The inquiry in France comes as Switzerland puts pressure on its banks to disclose client information, a break from its long-held policy of bank secrecy. In an effort to resolve a continuing dispute with the U.S. authorities over tax evasion by Americans, the Swiss government proposed legislation last week that would provide a legal basis for its banks to cooperate with the U.S. authorities.

Both houses of the Swiss Parliament will consider the legislation during the summer session; if passed, the law would be in effect for a year.

Prosecutors in the United States have opened criminal investigations into about a dozen Swiss and Swiss-style banks involving offshore private banking services that allowed tens of thousands of wealthy Americans to evade U.S. taxes.

The Swiss banks that have been the targets of U.S. investigations include Credit Suisse, which disclosed in July 2011 that it had received a letter saying it was under a grand jury investigation; the Zurich-based Julius Baer; two cantonal, or regional, banks; the Swiss operations of HSBC; and three Israeli banks, Bank Hapoalim, Bank Mizrahi-Tefahot and Bank Leumi.

Julius Baer acknowledged last week that it had received a formal request from the U.S. authorities for data on American clients of the bank’s offshore services.

In 2012, the Justice Department indicted Wegelin Co., Switzerland’s oldest private bank. The bank pleaded guilty to the charges in January, putting it out of business.

Lynnley Browning contributed reporting.

Article source: http://www.nytimes.com/2013/06/03/business/global/03iht-ubs03.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: bank secrecy, media outlets, swiss bank

DealBook: European Banks Show Signs of Health

April 30, 2013 by NewsMaker Leave a Comment

Arnd Wiegmann/ReutersUBS reported first-quarter earnings on Tuesday that were much stronger than predicted.

11:33 a.m. | Updated
Despite persistent unemployment, malaise and continuing debt problems, one sector in Europe seems to be benefiting: European banks.

After years of painful job cuts and moves to make portfolios less risky, several large European institutions reported strong first-quarter results in recent days, helped by cost-cutting and better performance of major units.

On Tuesday, the Swiss bank UBS and the Lloyds Banking Group of Britain surprised investors by reporting better than expected earnings for the first quarter, sending their shares up.

European lenders certainly continue to confront broad economic challenges like the burden of euro zone debt and pressure from regulators to strengthen their capital reserves. But there have been signs that some of the bigger banks are returning to health.

UBS reported a first-quarter profit of 988 million Swiss francs ($1 billion). Those results were down slightly from 1 billion francs in the period a year earlier, but far exceeded the 412 million francs predicted by analysts surveyed by Bloomberg News.

Sergio P. Ermotti, the chief executive, said in a statement that he was very pleased with the performance. He cautioned that it was “too early to declare victory,” but said the earnings showed the company’s “business model works in practice.”

The British banks Royal Bank of Scotland and HSBC, along with the French bank BNP Paribas, are among those still scheduled to report first-quarter figures in the coming days. But so far, the first-quarter results paint a somewhat encouraging picture of banks that have managed to limit losses from bad loans linked to the credit crisis, while reducing costs and returning to their core banking operations: credit and mortgages for some and wealth management for others.

Some investors caution that the continuing difficulties in the euro zone and weak demand for loans mean that many European banks remain in trouble despite relatively good earnings in the first quarter.

“They are doing their utmost to have a decent banking model and the numbers across the board were very good, but going forward we now have the issue of where the growth is going to come from,” said Florian Esterer, a fund manager at the MainFirst Group in Zurich.

Still, European banks are moving actively to address their problems, including by sharply cutting costs in the face of changing regulations and a sluggish European economy. Deutsche Bank, which reported earnings on Monday, said first-quarter profit rose as cost-cutting offset a decline in revenue from investment banking. Deutsche Bank’s stock also rose rose 4.7 percent in Frankfurt on Tuesday afternoon on the news that it would issue new shares to bolster its capital reserves.

UBS, meanwhile, has been eliminating 10,000 jobs, reducing bonus payments, scaling back its investment banking trading business and focusing more on its successful wealth management operation. Those steps helped the bank’s first-quarter results.

Net new money at its global wealth management business was 23.6 billion francs in the first quarter, compared with 10.9 billion francs in the period a year earlier. Pretax profit at wealth management outside the Americas fell 28 percent, to 664 million francs, while earnings at wealth management in the Americas rose 19 percent, to 251 million francs.

UBS also joined other banks, including its Swiss rival Credit Suisse and Barclays of Britain, in benefiting from higher revenue at its investment banking operation. At Credit Suisse, pretax profit in its investment banking division rose 43 percent, the bank said last week. Barclays, which also reported earnings last Wednesday, said pretax profit for its investment bank rose 11 percent in the quarter.

Analysts say European banks are starting to recover from the fallout from numerous financial scandals that have hurt their reputations.

UBS, for example, has sought to rebuild trust among clients after it uncovered a $2.3 billion trading loss in 2011 connected with the activities of a former trader, Kweku M. Adoboli, who has since been sentenced to seven years in jail. In December, UBS said it would pay $1.5 billion in fines to settle a case related to the manipulation of the London interbank offered rate, or Libor.

Many of the other large European banks have also been ensnared in the rate-rigging scandal. Deutsche Bank has set aside 2.4 billion euros ($3.2 billion) to cover the potential cost of proceedings that include a tax evasion inquiry in Germany and an international investigation into accusations that its employees and those at other investment banks colluded to fix benchmark interest rates.

While financial institutions will continue to address such issues, there is a cautious optimism now about bank performance.

“There are still some headwinds, but banks are pretty much there when it comes to reaching the right level of capital and that is helpful,” said Cormac Leech, an analyst at Liberum Capital. “There is a new appetite for banks among investors. There’s a confidence that wasn’t there two years ago.”

Jack Ewing contributed reporting.

Article source: http://dealbook.nytimes.com/2013/04/30/during-earnings-season-european-banks-show-signs-of-health/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: arnd, swiss bank, swiss francs

DealBook: Setting Aside More Cash for Legal Woes, Deutsche Bank Cuts 2012 Profit

March 20, 2013 by NewsMaker Leave a Comment

FRANKFURT — Deutsche Bank on Wednesday revised its 2012 profit sharply downward as it set aside more money to cover the potential cost of legal proceedings

Deutsche Bank, Germany’s largest lender, set aside an additional 600 million euros ($775 million) to cover legal problems, reducing its pretax profit for 2012 by the same amount. As a result, net profit for the year was 291 million euros, about 400 million euros less than the bank reported on Jan. 31.

Like many big European institutions, Deutsche Bank, which is based in Frankfurt, faces a raft of legal woes.

Deutsche Bank is dealing numerous lawsuits related to its sales of mortgages and mortgage-related derivatives in the United States before the financial crisis. Ronald Weichert, a Deutsche Bank spokesman, cited those suits as the main reason for setting aside more money for legal expenses.

The bank has also been ensnared by the global investigation into rate manipulation. In November, Deutsche Bank said it had set aside money for potential penalties related to the rate-rigging case. Now, it appears the German financial firm is increasing the buffer, partially in response to the string of recent settlements.

In February, Royal Bank of Scotland agreed to pay American and British regulators $612 million to settle claims that it rigged the London interbank offered rate or Libor. Last year, the Swiss bank UBS agreed to a $1.5 billion settlement and Barclays agreed to pay $450 million. The banks are also likely to face civil suits from people who paid more interest than they should have because of Libor manipulation.

In total, Deutsche Bank has set aside 2.4 billion euros in 2012 to cover possible judgments and other litigation costs. The legal expenses, the bank said, would not affect the dividend of 75 euro cents per share, which was announced in January.

Deutsche Bank was one of the few large German banks to avoid taking a direct government bailout during the financial crisis, and it is the only German bank able to compete in the same league as large American and British investment banks.

But Deutsche Bank continues to struggle with a daunting array of legal proceedings and official inquiries related to its behavior during the boom years. The bank’s co-chief executives, Anshu Jain and Jürgen Fitschen, have cut back on bonuses and taken other steps they say will discourage excessive risk-taking and unethical or illegal behavior in the future.

Article source: http://dealbook.nytimes.com/2013/03/20/deutsche-bank-cuts-2012-profit-and-sets-aside-more-cash-for-legal-woes/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: bailout, libor, swiss bank

DealBook: Regulators Propose Overhaul of Benchmark Interest Rate

January 11, 2013 by NewsMaker Leave a Comment

LONDON – European regulators called for a major overhaul of a benchmark interest rate on Friday, but stopped short of demanding direct regulatory oversight in the wake of the rate-rigging scandal.

The recommended changes to the euro interbank offered rate, or Euribor, follow a $1.5 billion settlement by the Swiss bank UBS after some of its traders were found to have altered the rate as well as the London interbank offered rate, or Libor, for financial gain.

As part of the overhaul, the European Banking Authority and European Securities and Markets Authority want to increase the accuracy of the benchmark rate and increase oversight over how banks submit rates to Euribor, which underpins trillions of dollars of global financial products.

European authorities said the system did not require participating banks to have internal governance structures to manage potential conflicts of interest when submitting rates to Euribor. The rate-setting process also is not sufficiently assessed against real banking transactions, according to the report.

The recommendations include cutting in half the number of maturities included in the Euribor process, to seven rates. That will leave the focus only on benchmark rates that are supported by large number of financial transactions.

The change is in response to a drastic reduction of lending between global financial institutions during the financial crisis that reduced the accuracy of firms’ rate submissions. The fall in actual transactions also led to a number of traders and senior managers at global banks to manipulate the rate, according to regulatory filings.

On Friday, European authorities did not demand direct regulatory control over Euribor, which continues to be overseen by the European Banking Federation, a trade body. A recent review by British authorities into Libor did recommend regulatory oversight of that rate, as well as criminal charges against individuals who try to alter the rate for financial gain.

Despite widespread calls for authorities to take control over global benchmark rates, the European regulatory bodies do not have the legal responsibilities to recommend those changes, according to a European Securities and Markets Authority spokesman.

The European Commission is considering changes to how global benchmark rates are set, and is expected to draft legislation later this year.

Other recommendations outlined by European authorities on Friday included regular audits by the European Banking Federation of the rate-setting process, as well as increasing the independence of the board that oversees Euribor. The trade body said it welcomed many of the changes outlined by the European banking and financial market regulators, adding that it was open to regulators participating in the supervision of Euribor.

Greater scrutiny of the benchmark rate is already having an effect.

As more banks continue to be embroiled in the rate-rigging scandal, a number of financial institutions, including Rabobank Groep of Holland and Raiffeisen Bank International of Austria, have left the panel that sets Euribor. Euribor-EBF, the group that oversees the rate, has said other banks may also pull out of the rate-setting process.

Article source: http://dealbook.nytimes.com/2013/01/11/regulators-propose-overhaul-of-euribor-interest-rate/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: british authorities, global financial institutions, swiss bank

DealBook: UBS Fined $47.5 Million in Rogue Trading Scandal

November 26, 2012 by NewsMaker Leave a Comment

Olivia Harris/ReutersThe former UBS trader Kweku M. Adoboli.

LONDON — The British financial services regulator fined UBS on Monday for failing to prevent a $2.3 billion loss caused by a former trader.

The fine of £29.7 million, or $47.5 million, was one of the largest ever penalties by the Financial Services Authority, the British regulator.

UBS was found to have had serious weaknesses in the internal controls of its investment banking unit. The failings led to Kweku M. Adoboli, a former trader at the Swiss firm, to rack up a multibillion-dollar trading loss last year after he carried out a series of unauthorized trades.

Mr. Adoboli, 32, received a seven-year jail sentence last week for two counts of fraud in connection with the loss for abusing his position at the Swiss bank from 2008 to 2011. Mr. Adoboli was found not guilty on another four counts of false accounting.

The Financial Services Authority had been working with its Swiss counterpart in a year-long investigation into UBS’s trading loss.

British and Swiss regulators said on Monday that the Swiss bank had failed to manage the risks of its London-based traders. The lack of supervision from top managers allowed the unauthorized trading to continue for an extended period of time, according to statements from authorities.

The failures led Mr. Aboboli to commit financial crimes, the regulators added.

“UBS’s systems and controls were seriously defective,” Tracey McDermott, director of enforcement and financial crime at the Financial Services Authority, said in a statement. “Failures of this type in firms of the size and standing of UBS not only damage the firms concerned but also wider confidence in the integrity of the markets and the financial system.”

The Swiss Financial Market Supervisory Authority said on Monday that Mr. Adoboli’s activities would have been detected earlier if UBS had higher levels of risk management in place at its London operations.

The Swiss regulator, which does not have the power to levy fines, said that it was appointing an independent investigator to oversee improvements in UBS’s internal risk management systems.

Authorities also are considering whether UBS should have higher capital requirements to cover potential losses in the firm’s risky trading activities. The Swiss bank is also not allowed to make any acquisitions connected to its investment banking division.

The Swiss regulator already had imposed restrictions on the bank, including the need to receive approval from authorities for new areas of trading activity at UBS’s investment bank.

UBS said that it accepted the decisions from the British and Swiss regulators. The firm said it had taken disciplinary action against employees involved in the scandal, adding that the bank also had taken steps to reduce its exposure to complex trading.

“We are pleased that this chapter has been concluded,” UBS said in a statement.

Shares in the Swiss bank fell 0.7 percent in morning trading in Zurich.

UBS’ fine is the latest penalty by British authorities against some of the world’s largest financial institutions.

The Financial Services Authority fined the British bank Barclays £59.5 million this year in connection with the manipulation of the London interbank offered rate, or Libor. JPMorgan Chase was also penalized £33.3 million in 2010 for failing to protect British clients’ money from 2002 to 2009.

As UBS agree to settle with the British authorities, the Swiss bank received a 30 percent reduction on its overall fine. Without the discount, the firm would have been fined £42.4 million.

UBS also paid an £8 million fine to British regulators in 2009 after an employee in the firm’s London-based wealth management unit carried out unauthorized trades with clients’ money.

The Swiss bank is planning a major overhaul of its banking operations. Last month, the firm announced 10,000 layoffs in its investment banking unit, with almost half of the job losses expected to be in London.

The move is an effort to refocus UBS’s operations on its profitable wealth management business instead of risky trading activity.

Article source: http://dealbook.nytimes.com/2012/11/26/ubs-fined-47-5-million-in-rogue-trading-scandal/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: financial crime, supervisory authority, swiss bank

DealBook: Kweku Adoboli, Ex-UBS Trader, Is Accused of Brazen Gambling at Fraud Trial

September 14, 2012 by NewsMaker Leave a Comment

Neil Hall/ReutersKweku M. Adoboli, leaving court in London, has pleaded not guilty to false accounting and fraud charges.

LONDON — Fictitious trading and brazen gambling by a single individual could have brought down the Swiss financial giant UBS, a British prosecutor said on Friday at the trial of a former bank employee accused of causing a multibillion-dollar trading loss.

That thesis is at the heart of the case against Kweku Adoboli, a former UBS trader in London who faces four counts of fraud and false accounting in connection with a $2.3 billion loss at the Swiss bank. He has pleaded not guilty to the charges.

In their opening statement, prosecutors portrayed Mr. Adoboli as a free-wheeling trader who doctored documents, invented profits and fabricated clients to cover up his rogue activities. Sasha Wass, the lead prosecutor, told a jury that Mr. Adoboli was motivated by greed and ego as he looked to increase his salary and status at the bank.

DealBook: Sometimes, It Takes a Thief to Catch One

September 12, 2012 by NewsMaker Leave a Comment

Bradley C. Bower/Bloomberg NewsThe I.R.S. said this week that Bradley Birkenfeld, a former UBS banker, would receive a $104 million whistle-blower award.

It’s enough to make many criminals jealous. The $104 million whistle-blower award by the Internal Revenue Service to Bradley Birkenfeld demonstrates how the government is willing to use a thief to catch a thief.

The question is whether there may be a perverse incentive for people to first help others violate the law in the hopes of later garnering a fat check. The eye-popping reward may be a lure for others to search high and low for fraud, and perhaps even help commit a crime for the sake of the potential reward. But there are protections built into federal whistle-blower programs that try to limit how much criminals can profit from the government for their misdeeds.

In Mr. Birkenfeld’s case, there is some evidence that he tried to do the right thing while he was still working at UBS in assisting wealthy American clients hide assets abroad to avoid paying taxes. After raising questions internally about the legality of the program and being rebuffed, he turned to the I.R.S. and became a whistle-blower.

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The information he provided was crucial to blowing the lid off Swiss bank secrecy, helping the I.R.S. and other countries pry information from banks about foreign clients that has largely undermined a tradition of shielding assets that goes back centuries.

The $104 million payment is almost a pittance compared with the taxes and penalties the government continues to collect from wealthy taxpayers fearful of the inevitable knock at the door if they don’t turn themselves in.

Mr. Birkenfeld pleaded guilty to conspiracy to evade taxes and received a 40-month prison term. His conviction related to assisting a client of UBS, so his $104 million award is based on tax evasion by others and is unrelated to his offense. He is residing in a community correctional facility as he finishes his sentence, and is the rare prisoner who does not need to look for a job when he is released from custody later this year.

The government makes deals with criminals all the time, therefore whistle-blower programs should not be viewed as outliers.

In criminal prosecutions, defendants frequently plead guilty to reduced charges along with a favorable sentencing recommendation in exchange for cooperating against others. There is a substantial discount given to those who agree to assist the government rather than take their case to trial.

For example, in the recent prosecution of Raj Rajaratnam for insider trading, Anil Kumar received two years’ probation for what prosecutors described as “extraordinary cooperation” while Mr. Rajaratnam is serving an 11-year prison term after his conviction.

A section of the federal bribery law makes it a crime to offer “anything of value” to a person “with intent to influence the testimony under oath or affirmation” as a witness at a trial. But the federal courts have refused to find that a plea agreement is a type of bribe — at least as long as there is not a direct payment to influence the testimony.

The whistle-blower programs that award a portion of the government’s recovery to the person who supplies information are in many ways an extension of the deals made with individual defendants. These programs do try to impose some limits on the potential reward if the whistle-blower is also involved in the wrongdoing.

The I.R.S. permits a reduction of an award if whistle-blowers “planned and initiated the actions” involved, and precludes a payment if whistle-blowers were convicted based on their role in the violation.

Other government agencies have also taken steps to remove any incentive for people to commit crimes for the sake of rewards.

The Securities and Exchange Commission’s whistle-blower rules, put in place as part of the Dodd-Frank Act, deduct from an award any amount traceable to the person’s own misconduct. The rules also allow the S.E.C. to reduce a payment based on the whistle-blower’s culpability or involvement in the violations, and prohibit an award if the person obtained the information illegally.

The oldest whistle-blower program is under the federal False Claims Act, which allows individuals to sue on behalf of the government, called a qui tam action, to recover amounts paid out based on false or fraudulent submissions.
Before Mr. Birkenfeld’s award, the largest whistle-blower payment had been $96 million for information about violations by GlaxoSmithKline that resulted in a $750 million settlement in 2010.

A provision of the False Claims Act provides that if the whistle-blower “planned and initiated the violation,” then the award could be reduced “to the extent the court considers appropriate.” The provision goes a step further by prohibiting any payment if the person “is convicted of criminal conduct arising from his or her role in the violation.” That provision is broader than the I.R.S. rule by making any conviction related to the violation grounds to block an award.

There are other risks for those who might have participated in wrongdoing and are hoping to become the next Bradley Birkenfeld.

The whistle-blower programs effectively require a person to be the first one in the door with valuable information. If the agency already knows about the violations, or the information has become public, then the person is not an original source and cannot receive a reward.

Moreover, the payment depends on the recovery of money and placement of penalties. This can take years, particularly for tax cases because the award will not be made until all appeals have been exhausted.

Becoming a whistle-blower is not something to aspire to, either. While there are provisions in the laws preventing retaliation, the decision to blow the whistle on one’s employer and co-workers is not an easy one. Once undertaken, blowing with whistle can trigger substantial personal costs, and perhaps even the risk of jail time.

While it may be easy to say in hindsight that a 40-month prison term is worth $104 million, there was strong resistance to give anything to Mr. Birkenfeld. So the pot of gold at the end of the rainbow may never appear, or can take years to be reached.

And, as the I.R.S. points out, “All awards will be subject to current federal tax reporting and withholding requirements,” so you still owe taxes on it.

Peter J. Henning, who writes White Collar Watch for DealBook, is a professor at Wayne State University Law School.

This post has been revised to reflect the following correction:

Correction: September 12, 2012

An earlier version of this post misspelled the surname of the former UBS banker who received a whistle-blower award from the I.R.S. It is Bradley Birkenfeld, not Birkenfield.

Article source: http://dealbook.nytimes.com/2012/09/12/sometimes-it-takes-a-thief-to-catch-one/?partner=rss&emc=rss

Filed Under: Business News Tagged With: conspiracy, swiss bank, whistle blower