Sure, avoid the taxman send it off shore!

Raoul Weil was indicted in a U.S. tax evasion crackdown this week.

SPECIAL INVESTIGATION: Zurich's Secretive ‘Canada Desk'

Swiss Banking's $5.6-Billion Man - Accused By The U.S. Of Helping The Wealthy Hide Their Fortunes From The IRS, Former UBS Executive Also Led A Covert Team In Canada That Funnelled Mountains Of Cash Offshore

GREG MCARTHUR
Globe and Mail
November 14, 2008

A senior Swiss banker who was charged two days ago by United States prosecutors with dispatching bankers to help rich Americans evade taxes also oversaw a covert team in Canada that funnelled as much as $5.6-billion offshore, The Globe and Mail has learned.

Raoul Weil, former head of wealth management for Swiss financial giant UBS, has been accused by the U.S. Department of Justice of equipping a team of bankers with encrypted computers and countersurveillance training in an effort to conceal $20-billion from the Internal Revenue Service.

Internal UBS records, as well as interviews with former UBS officials, show Mr. Weil was in charge of a similar operation in Canada. A team of a dozen or so bankers, known internally in UBS's Zurich and Geneva offices as the “Canada Desk,” made several trips a year to UBS-sponsored events, such as chamber orchestra concerts, and encouraged the country's wealthy elites to move their money to Switzerland.

UBS operates a legitimate, licensed Canadian subsidiary, which manages the multimillion-dollar portfolios of many well-to-do clients, but officials from the subsidiary say the members of the Canada Desk never set foot in its offices in Toronto, Montreal, Calgary and Vancouver.

Swiss bankers trained to avoid detection

There is so much secrecy surrounding the Canada Desk, which has been led by a Zurich-based banker named Edith Roellin, that many former directors said they had never heard of the group.
“It was not talked about. It was never mentioned. I didn't really even know they existed,” said Fred Ladly, a former director of the Canadian subsidiary's wealth-management division for about 10 years. “I think I could say this for all the other members. If I knew something like that was going on, I'd quit.”

Another former official of the licensed business said the subsidiary kept a “distance” from Ms. Roellin and her team.

“From a compliance and governance perspective, UBS Canada did not participate nor know of those assets,” said the former official, who declined to be named.

Although their dealings in Canada are discreet, Ms. Roellin and her team appear to do significantly better business than UBS's licensed operation. Internal bank balance sheets obtained through the investigations in the United States show that as of October, 2005, the Canada Desk managed $5.6-billion. The licensed business held less than half that – $2.6-billion.
The bank declined to make Ms. Roellin available for an interview, and she did not respond to an e-mail request for comment.

Despite the highly publicized indictment of Mr. Weil, which made the front page of The Wall Street Journal, as well as the arrest of several UBS bankers in countries such as Brazil, the Canadian operation has received little scrutiny from law-enforcement officials. The Canada Revenue Agency has refused to say whether it has launched an investigation.

Records released in the United States show that the bank itself was aware it was on shaky legal ground every time Ms. Roellin and her team touched down at a Canadian airport.

One UBS slideshow, which was released through a U.S. Senate hearing and dated 2003-2005, warns: “It is not permissible for non-Canadians [sic] banks outside of Canada to seek out banking relationships with Canadian residents while the residents are in Canada.”

That law is a provision of the Bank Act that Parliament passed more than two decades ago to clamp down on foreign bankers – so-called suitcase bankers – attempting to skirt domestic regulations. As the law stands, a banker who does not work for a licensed subsidiary or branch is not supposed to be in Canada doing business.

“That would be illegal” said Robert MacIntosh, a former president of the Canadian Bankers Association, when he was told about UBS's dual operations. “That's what happens over time. People bend around the rules and forget what the rules were in the first place.”

Some of the bank's defenders argue that Ms. Roellin and her team aren't in violation of the law because UBS has a licensed operation in Canada. However, each UBS Canada official interviewed by The Globe disavowed the conduct of Ms. Roellin and the Canada Desk.

UBS declined to explain why it issued an internal warning about that provision of the Bank Act, but continued to send Swiss bankers to Canada.

"I don't think it makes sense that we go into this thing,” UBS spokesman Serge Steiner said when asked about the contradiction between the bank's internal warning and Ms. Roellin's regular trips to Toronto. “We can't go now and discuss every and each detail on several documents.”

Canada's banking regulator, the Office of the Superintendent of Financial Institutions, is responsible for enforcing the law, but in the past three years it hasn't handed out any formal notices of violation. A spokesman for the regulator said the normal practice is to issue an informal notice, which he said is usually sufficient to get offenders to stop. The agency declined to say how many informal notices it has issued.

No former management executives of UBS's Canadian subsidiary reached by The Globe would speak on the record, but several said there were legitimate reasons why a Canadian would prefer a Swiss UBS banker over someone from the Canadian branches. One former official highlighted the service culture and reputation of Swiss bankers. The former officials also pointed to the expansive pool of mutual funds available through the Swiss offices, which dwarf the securities products available in Canada.

Professor Reuven Avi-Yonah, an international tax expert at the University of Michigan and a member of the Board of Editors of the Canadian Tax Journal, dismissed those explanations. If enhanced service was the main reason for parking savings in Switzerland, UBS could implement similar service at its Canadian branches, Professor Avi-Yonah said.

As for mutual-fund options, no one from the Canada Desk is registered with the country's securities commissions, which means it's illegal for them to market securities during their trips.
“By and large, the main reason is bank secrecy and to hide income from Revenue Canada,” Professor Avi-Yonah said. “When UBS sends their own Swiss people into Canada to solicit the funds that's basically what they're promising.”