The world's largest wealth manager has reached agreement on a dispute with US authorities over a client who had an account in Singapore.

UBS has ended a legal tussle with the US Internal Revenue Service, agreeing to hand over records on a US client's account in Singapore. The matter highlights how the US fight against alleged offshore tax dodgers is heading East.

The case is about Ching-Ye Hsiaw, a US citizen living in China who had an account in Singapore from 2001 to 2011. On 23 February, the IRS filed a petition asking a federal judge in Miami to force UBS to produce account records on Hsiaw. The IRS said it needed the records to determine Hsiaw's income tax liabilities from 2006 to 2011.

"UBS confirms that it complied with the summons based on client consent in accordance with Singapore law," the bank told this news service in an emailed statement.

An agreement meant the Zurich-listed bank handed over records on 31 May and 10 June, the Justice Department said earlier this week. 

“UBS AG has complied with an Internal Revenue Service (IRS) summons for bank records held in its Singapore office,” the DoJ said in a statement on its website.

“Because UBS has now produced all Singapore-based records responsive to the request and the IRS determined that UBS complied with the summons, the Justice Department has voluntarily dismissed its summons enforcement action against the bank,” it said.

“The IRS served an administrative summons on UBS for records pertaining to accounts held by Ching-Ye 'Henry' Hsiaw. According to the petition, the IRS needed the records in order to determine Hsiaw’s federal income tax liabilities for the years 2006 through 2011. Hsiaw transferred funds from a Switzerland-based account with UBS to the UBS Singapore branch in 2002, according to the declaration of a revenue agent filed at the same time as the petition. UBS refused to produce the records, and the United States filed its petition to enforce the summons,” the DoJ continued.

“The Department of Justice and the IRS are committed to making sure that offshore tax evasion is detected and dealt with appropriately,” said acting assistant attorney general Caroline Ciraolo of the tax division.  “One critical component of that effort is making sure that the IRS has all of the information it needs to audit taxpayers with offshore assets. In this case, we filed a petition to enforce a summons for offshore documents, but that’s only one of the tools we have available for gathering information."

She added: "Taxpayers with offshore assets who underreported their income should come forward before we come looking for them."

Singapore has not yet felt the full force of US worldwide tax enforcement powers, as Washington has so far focused its attention on Switzerland, home to around a quarter of an estimated $10 trillion in offshore funds (source: Boston Consulting Group). Swiss bank secrecy laws, dating back in their current form to 1934, have been breached in a series of agreements and the country has signed up to the Common Reporting Standard regime, enabling exchange of data. 

The Asian city-state is sometimes considered a home for money that might be fleeing Switzerland, although regulators such as the Monetary Authority of Singapore have been at pains to stress the jurisdiction is not a soft touch for dirty money. A few weeks ago, the MAS moved to revoke the merchant banking licence of BSI Bank, part of Lugano-headquartered BSI, for anti-money laundering offences connected with allegedly corrupt transactions around Malaysia’s state-run 1MDB fund.

While the US has used its economic clout to go after offshore financial centres such as Switzerland, it has been accused of hypocrisy. The state of Delaware, for example, is sometimes condemned as offering weaker levels of disclosure around beneficial ownership than is the case with some other IFCs, and lawmakers in Congress have not yet readied legislation to enable data to be extracted from the US.