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Legal offshore: No oxymoron, Swiss banks re-enter US market

Several Swiss banks are again marketing their asset preservation and wealth diversification services to U.S. clients. A chief executive officer of a UBS branch says they are only accepting “clients who have declared all their assets” to the Internal Revenue Service.

The August 13th article, which appears on swissinfo.ch cites managing attorney Scott Kauffman. He notes that Swiss financial institutions must address their tarnished image after the IRS crackdown on undisclosed offshore account. Kauffman said that in his experience “once [his clients] have paid their fines, they have one single desire: to repatriate their funds to America.”

He notes that even with the IRS disclosure rules there are valid reasons to keep funds out the watchful eye of others. Kauffman explained that “some people are in the midst of a heated divorce and do not want their wives to know how much money they have.”

A diversified investment strategy is another reason for wealthy Americans to work with a Swiss bank. The level of U.S. debt and public fund weakness makes investing outside a home market a savvy hedge. Swiss banks often offer more opportunities to invest in emerging markets and currencies, as well.

There are three banks that dominate the legal offshore market – UBS-SFA, Pictet North America Advisors and Vontobel Swiss Wealth Advisors. Each has faced legal issues. UBS paid a substantial fine to settle with the U.S. Department of Justice. At least one former UBS banker still faces trial. Pictet is one of 14 banks under investigation by the DOJ. Vontobel is working with the DOJ, but was mentioned in a tax evasion trial of former Julius Baer banker.

Ever since the IRS prioritized offshore account disclosures, it has become especially important to seek the counsel of an experienced tax attorney when diversifying a portfolio with international accounts and investments. Ensuring compliance initially can limit the risk of an audit triggering penalties, interest and back taxes.

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