UBS halts U.S. offshore services

By Kevin Drawbaugh and Rachelle Younglai

WASHINGTON (Reuters) - UBS AG (UBSN.VX) overhauled its offshore private banking business for U.S. residents on Thursday in the face of accusations by congressional investigators that the Swiss bank helped clients dodge taxes.

In a dramatic hearing on Capitol Hill before a Senate subcommittee, a senior UBS executive apologized and announced the bank would cease offering cross-border private banking through its unregulated units to U.S.-domiciled customers.

Mark Branson, chief financial officer for UBS Global Wealth Management and Business Banking, said the bank's 80,000 employees were alarmed by reports of misconduct.

"They want to know that such misconduct does not belong in UBS and that the firm's ethics match their own," Branson said.

"I am here today to tell you and to tell them that no, that kind of misconduct does not belong in UBS."

Branson said UBS was working with the U.S. government to identify U.S. clients who may have engaged in tax fraud.

The hearing before the Senate Permanent Subcommittee on Investigations marked the U.S. Congress' latest exploration of international tax havens, which lawmakers said annually deprive the U.S. government of $100 billion (50 billion pounds) in revenues.

Thousands of wealthy Americans avoid taxes by hiding assets in Switzerland and the tiny European principality of Liechtenstein, the subcommittee said, in a report on UBS and LGT Bank, which is controlled by Liechtenstein's royal family.