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Liechtenstein has long been thought of as a country which is a tax haven for those who wanted to avoid paying U.S. income taxes. And now, a former banker with UBS, a Swiss bank with a license to do business in the United States, says employees were trained on helping customers avoid U.S. tax laws. Bradley Birkenfeld has pleaded guilty to tax evasion in the U.S. and is helping federal prosecutors investigate banking practices.

It is alleged that UBS Bank helped at least 19,000 U.S. consumers to create "undeclared" bank accounts in Liechtenstein, which hid $18 billion in assets from the Internal Revenue Service.

Senator Carl Levin (D-MI) is head of a Senate committee that held a hearing about this issue today. He released a list of "secrecy tricks" to the media, which include some of the following tactics to help hide assets: give clients code names, use pay phones instead of business phones, create undeclared accounts, transfer companies to cover tracks, use foreign shell companies, create fake charitable trusts, use anonymous wire transfers, disguise business trips, and shred mail.
It is alleged that UBS violated U.S. banking laws by providing services it was not licensed to provide and by misusing Swiss bank secrecy laws. UBS is being investigated by the IRS, FBI, and Securities and Exchange Commission. This could get very interesting. It's already sounding mighty "cloak and dagger" with former employee Birkenfeld telling a story about buying diamonds with a client's Swiss bank funds and smuggling them into the United States in a toothpaste tube.

I'm not a fan of income taxes, and will do anything legal to reduce my tax burden as much as possible. But if I have to follow the laws, so should everyone else. Using foreign laws and tax havens to avoid U.S. taxes is wrong, and if UBS is actively helping customers to do just that, they need to be stopped and punished.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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