The UBS clients who used Hong Kong & Singapore corporations told prosecutors how their bankers and lawyers helped them set up offshore corporations so their assets would be hidden in accounts that didn’t bear their names, court records show.

Hong Kong hasn’t been the only tax jurisdiction implicated in the past year. UBS admitted in February that it helped U.S. clients create sham companies in Panama and the British Virgin Islands, while hiding the true owners from the U.S. Internal Revenue Service. UBS clients who pleaded guilty also implicated Singapore, Liechtenstein, Mexico and the Cayman Islands.

“We’re going to be scouring the 7,500 disclosures to identify financial institutions, advisers and others” who helped taxpayers cheat on taxes, IRS Commissioner Douglas Shulman said.

 

Before 2014, all financial institutions in Singapore must identify accounts they strongly suspect hold proceeds of fraudulent or willful tax evasion and, where necessary, close them. After that, handling the proceeds of tax crimes will be a criminal offence under changes to the city-state's anti-money laundering law. Bankers may now feel compelled to give up some of the lucrative accounts that have fuelled a boom in Singapore's assets under management to more than $1 trillion, with 50 percent growth in the five years to 2011, according to the latest government data.

New foreign clients may find that banks become far more picky and inquisitive as the change in mindset takes hold.

A Swiss lawyer accused of helping U.S. clients conceal millions of dollars in offshore accounts pleaded guilty to conspiracy to commit tax fraud in federal court in New York on Friday and has been telling prosecutors how he helped American clients use secret accounts to hide assets from the Internal Revenue Service.

Edgar Paltzer, 57, admitted Aug. 16 in federal court in New York that he conspired to commit tax fraud by helping U.S. clients hide millions of dollars from the IRS. He was indicted on April 16 with a Swiss banker, Stefan Buck.

Paltzer, a former partner of Swiss law firm Niederer Kraft & Frey, was first charged in April on one count of conspiracy alongside Stefan Buck, then head of private banking at Bank Frey & Co AG.

Frey, the bank's founder, had also been a partner in Niederer Kraft & Frey. But he resigned on April 25, with Niederer Kraft at the time saying it "concluded that it was in the best interests" of the law firm.

The indictment accused Paltzer and Buck of conspiring with U.S. taxpayers from 2000 through at least 2012 to help them hide their Swiss accounts from the Internal Revenue Service.

The case shed light on Bank Frey, one of the smaller Swiss private banks with just 1.9 billion Swiss francs ($1.54 billion) under management last year.

Prosecutors say the bank gained U.S. clients as the Justice Department pursued other banks.
U.S. authorities say that by the third quarter of 2012, about 44 percent of the bank's assets under management were for U.S. taxpayers.

The number had grown 300 percent between February 2009 and February 2012 amid prosecutions of rival banks UBS AG and Wegelin & Co.

Paltzer is cooperating with U.S. authorities in their broader investigation of how foreign banks and advisers helped American clients evade taxes.

His cooperation offers U.S. investigators a rare inside look at how Swiss bankers and advisers used sham trusts and corporations and moved cash and jewelry across borders to hide their assets from the IRS. He admitted that he acted as a financial intermediary to opening bank accounts in Switzerland in the name of entities he formed for U.S. citizens, knowing they intended to evade taxes.

Since 2008, the U.S. government has charged at least 90 people in a crackdown on offshore Tax Evasion, including 24 Bankers, Lawyers and Advisers.

He agreed to pay restitution and forfeit fees he earned from his crime, which carries a potential 5 year prison term. As a cooperator, prosecutors have agreed to submit a letter to the sentencing judge outlining his assistance to the U.S.

The Swiss government unveiled a plan in July that could potentially allow the banks to cooperate with U.S authorities, who are seeking penalties of as much as $10 billion.

U.S. prosecutors haven't just targeted offshore tax evasion in Switzerland. In July, Liechtenstein's oldest bank, Liechtensteinische Landesbank AG, agreed to a $23.8 million settlement to avoid criminal charges for opening and maintaining undeclared bank accounts for U.S. citizens and turn over .

The case is U.S. v Paltzer, 13-cr-00282, U.S. District Court, Southern District of New York (Manhattan).