UBS is to exit entirely its US cross-border business said Mark Branson, chief financial officer of Global Wealth Management & Business Banking, today at a US Senate Subcommittee hearing, "Tax Haven Banks and US Tax Compliance".

"That means UBS will no longer provide offshore banking and securities services to US residents through its bank branches. Such services will only be provided to residents of this country through companies licensed in the United States", Mr Branson told the subcommittee.

The move will address any compliance failures that may have occurred in this business, he said.

A spokesman for UBS told WealthBriefing that the Swiss bank would move clients to its US domestic business or to its SEC-registered offices in Hong Kong and Switzerland. The process of redefining the US cross-border business model had begun in last November, he said. This was in response to the ongoing investigations of the US Department of Justice and the SEC.

Mr Branson also told the subcommittee that UBS is working with the US Government to identify the names of US clients who may have engaged in tax fraud and admitted that the bank’s controls and supervision had been inadequate.

He said that although client identity is generally protected from disclosure under Swiss law this does not apply when disclosure of client names is requested in connection with an investigation of tax fraud and where the requests are presented to the Swiss government through established legal channels.

“UBS will fully support and assist that process,” he said, confirming earlier press reports.

At the hearing Mr Branson also pointed out that the cross-border business under the QI Agreement was – and is – entirely legal in both Switzerland and the US. He said that the QI expressly contemplated that US citizens could access bank accounts in Switzerland and other countries without providing a form W-9, as long as they held no US securities.

"Unless or until those rules are changed, that is the framework with which we and other banks must comply."         

"We did have detailed written policies that prohibited our employees from engaging in some of the conduct that our internal investigation has uncovered, such as assisting in the creation of sham offshore companies to defraud tax authorities. While our own review is not complete, it is apparent now, that our controls and supervision were inadequate. UBS is committed to taking both corrective and disciplinary measures."

US citizens hold around 19,000 accounts at UBS, and an estimated $18 billion to $20 billion in assets under management in Switzerland, according to the US authorities.