Travel Ban Seen As Blow To UBS, Sign Of Drive To Rebuild Image - Industry Comments

Tom Burroughes

7 April 2009

UBS’s ban on client-facing staff from worldwide travel, after a bruising US tax case, will hurt the Swiss firm in the short run but it demonstrates how determined UBS is to restore its reputation, industry figures say.

The world’s biggest wealth manager, which recently agreed to pay $780 million to settle a US criminal case in which it had been accused of helping wealthy US citizens evade taxes, has confirmed that it has banned wealth management client advisors from international travel. The ban came into force from 1 April. UBS has already moved to stop offering offshore banking facilities to the US market.

When asked by WealthBriefing as to how many client relationship managers will be affected by the ban, UBS was unable to give a specific figure.

“It banking secrecy and banks need to prepare themselves,” the analyst said, adding that the move signalled how determined UBS is to avoid further troubles and repair its reputation.

Credit Suisse, meanwhile, which is Switzerland’s second-biggest bank, has already moved to avoid falling foul of an increasingly hostile international environment towards offshore banking. In February, it was reported that Credit Suisse had written to its US clients holding Swiss accounts asking them to sign a form - the so-called W9 form - that would reveal them to US tax authorities.

"Credit Suisse conducts all its business in compliance with the highest compliance standards, applicable laws, regulations, and policies,” according to a statement from the bank.

In the UBS statement, it did not say how many people will be affected by the change, nor how the firm may re-position its business to deal with such a travel restriction.

“The travel ban will be in place pending the finalization of this review, as an immediate step to reduce compliance risk,” the statement said. It said the ban was designed to ensure that client-facing staff are “confident that they are performing their activities in a lawful way”.

The woes of UBS – it has lost an estimated $49 billion in write-downs due to the credit crunch – have also highlighted the pressures that Switzerland’s traditionally discreet private banks have been under. Last week, the Group of 20 major industrialised and emerging market countries such as Germany, the US and China agreed on a crackdown on offshore financial centres, threatening sanctions – as yet not detailed – against so-called tax havens that fail to comply with requests for information to catch tax evaders.

UBS’s legal clash with the US has been one of the factors prompting Morgan Stanley, for example, to recommend investors switch out of UBS shares and into rivals such as Credit Suisse instead.

The Swiss banking industry has hit out at what it calls the double-standards of countries such as the UK, which has led much of the charge against offshore tax havens and yet operates substantial offshore centres, such as the Channel Islands, the Isle of Man and British Virgin Islands.