JPMorgan Hack Justifies Secret Accounts, Ex-UBS Banker Says
(Bloomberg) -- A former UBS Group AG banker told a Paris court that a cyber attack on Wall Street and Russian meddling in the 2016 U.S. elections show the benefits of a UBS service that allowed clients to conceal their identity via numbered Swiss accounts.
Raoul Weil, the former head of UBS’s wealth management unit, disputed allegations that these types of accounts in Switzerland could be used to help French clients of the bank hide money from tax authorities. He also admitted that the bank had no way of knowing whether French residents declared the money they put in Swiss accounts.
The 58-year-old told the Paris criminal court Thursday that numbered accounts had “the exact same due diligence obligations as the named accounts” but simply had additional “security features.” Until about a decade ago, UBS managers all had such accounts to prevent the bank’s back office staff to know their salaries.
Additionally, numbered accounts “had the advantage that when hackers entered in the main system of the bank they could not steal account names as they did at JPMorgan Chase & Co.” and Facebook Inc., Weil said on the third week of the trial. “This is a feature that banks should offer to clients. The last U.S. election was decided by Russian hackers.”
The UBS case is part of a French crackdown on tax fraud conducted via Switzerland that’s seen the conviction of a former minister and a 300 million-euro ($341 million) settlement with HSBC Holdings Plc. France is seeking 1.6 billion euros in compensation from Zurich-based UBS in the case and the bank could face billions of euros more in fines.
Weil is also charged in the case over accusations French bankers at UBS worked hand in hand with Swiss counterparts to encourage residents in France to avoid taxes by stashing money offshore. The trial is also focusing on allegations UBS provided banking services such as numbered accounts and set up trusts to launder money clients hadn’t declared.
While UBS agreed in 2009 to pay $780 million to avoid U.S. prosecution in a parallel case after admitting it helped thousands of clients in the country cheat the Internal Revenue Service, Weil was cleared about five years later in the same case. The verdict was a major setback in the U.S. crackdown on tax evasion begun at the onset of the financial crisis.
JPMorgan outlined the scope of the previously disclosed 2014 breach, reassuring clients there’s no evidence account numbers and passwords were compromised, even as names and contact data were exposed.
On Thursday, Weil put the onus on UBS’s clients to pay their taxes in response to the allegations that the lender conspired with clients to hide money revenue officials.
“It was impossible to trace whether they paid or they didn’t pay,” he said. In any case, it wasn’t information they would volunteer, Weil said. In the 30 years that he has been a “private banker, no client has come to me and said ‘by the way I am a tax cheat.’”
Weil’s remarks made Xavier Normand-Bodard, a lawyer for the French government, leap up and ask whether he “ignored” undeclared accounts at the lender.
“It was not a question of ignoring it’s just that we didn’t know” the status of the accounts, Weil answered.
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