UBS AG Under Belgium Regulators' Probe - Analyst Blog

UBS AG UBS is under probe by the Belgium regulators over doubt surrounding money laundering and illegal activities related to tax evasion. The regulators are scrutinizing foreign activities of Switzerland's largest bank by assets. Notably, Belgium has become the latest European country to investigate UBS AG's actions.

Being unaware of the investigation, which has been initiated over the Belgium unit since the end of last year by the prosecutors, the bank was not in a position to comment. However, UBS AG has confirmed its operation to be fully in compliance with relevant laws and regulations. Moreover, the bank denied its involvement in any activities that would aid its clients to evade their tax obligations.

The current probe is not new to the bank. Previously, UBS AG has been under the scrutiny of other European countries' regulators for its foreign operations.

Last year, the French unit of UBS AG was under the French authorities' probe, which accused the bank of opening clients' accounts for evading taxes. The German unit of the bank was also under scrutiny in 2012 for the same issue.

However, UBS AG declined the allegations then stating that since 2009 its business has been under strict vigilance and the bank is fully abiding by the laws. Notably, the Swiss bank paid $780 million in 2009 to regulators as settlement related to U.S. criminal and civil investigation and acknowledged that it had helped clients evade taxes.

Following UBS AG's settlement, two other Swiss banks, Wegelin & Co. and Liechtensteinische Landesbank AG paid settlement charges of roughly $74 million and $24 million, respectively.

UBS AG is not the only Swiss bank to be involved in such issues. In May 2014, Credit Suisse Group AG CS pleaded guilty to criminal charges of assisting its U.S. clients to evade tax. The company will also shell out $2.8 billion as settlement charges to the U.S. authorities. The plea agreement revealed that Credit Suisse in several ways aided U.S. clients in hiding their undeclared accounts from the Internal Revenue Service IRS, which includes helping clients to use false entities, destruction of account information forwarded to the U.S. and avoiding currency transaction reporting requirements by structuring fund transfers.

Notably, the Swiss units of big Wall Street players like The Goldman Sachs Group, Inc. GS and Morgan Stanley MS have consented to cooperate with the Department of Justice (DOJ) regarding the ongoing probe into their alleged involvement in tax evasion practices. It must be mentioned that negligence relating to such critical rules is unacceptable since these issues can give rise to dire consequences.

We believe that ongoing investigations on banks will be a step forward toward reducing the huge losses incurred due to offshore tax evasion. Regulatory authorities are investigating scandals and are determined to put forward a landmark judgment to terminate such shrewd practices in the future, bring justice to the sufferers and punish the wrongdoers.

UBS AG currently holds a Zacks Rank #3 (Hold).

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