WASHINGTON, USA — The US Department of Justice announced on Thursday that the following four banks reached a resolution under the department’s Swiss Bank Program:
• Société Générale Private Banking (Lugano-Svizzera)
• MediBank AG
• LBBW (Schweiz) AG
• Scobag Privatbank AG
“Today’s agreements reflect the Tax Division’s continued progress towards reaching appropriate resolutions with the banks that self-reported and voluntarily entered the Swiss Bank Program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “The department is currently investigating accountholders, bank employees, and other facilitators and institutions based on information supplied by various sources, including the banks participating in this Program. Our message is clear – there is no safe haven.”
The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offences in connection with undeclared US-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are required to:
• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which US taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
• Agree to close accounts of accountholders who fail to come into compliance with US reporting obligations; and
• Pay appropriate penalties.
Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.
According to the terms of the non-prosecution agreements signed on Thursday, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared US accounts and pay the penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offences.
Société Générale Private Banking (Lugano-Svizzera) SA (SGPB-Lugano) was established in 1974 and is headquartered in Lugano, Switzerland. Through referrals and pre-existing relationships, SGPB-Lugano accepted, opened and maintained accounts for US taxpayers, and knew that it was likely that certain US taxpayers who maintained accounts there were not complying with their US reporting obligations.
Since August 1, 2008, SGPB-Lugano held and managed approximately 109 US-related accounts, with a peak of assets under management of approximately $139.6 million, and offered a variety of services that it knew assisted US clients in the concealment of assets and income from the Internal Revenue Service (IRS), including “hold mail” services and numbered accounts. Some US taxpayers expressly instructed SGPB-Lugano not to disclose their names to the IRS, to sell their US securities and to not invest in US securities, which would have required disclosure and withholding.
In addition, certain relationship managers actively assisted or otherwise facilitated US taxpayers in establishing and maintaining undeclared accounts in a manner designed to conceal the true ownership or beneficial interest in the accounts, including concealing undeclared accounts by opening and maintaining accounts in the name of non-US entities, including sham entities, having an officer of SGPB-Lugano act as an officer of the sham entities, processing cash withdrawals from accounts being closed and then maintaining the funds in a safe deposit box at the bank and making “transitory” accounts available, thereby allowing multiple accountholders to transfer funds in such a way as to shield the identity and account number of the accountholder.
SGPB-Lugano will pay a penalty of $1.363 million.
Created in 1979 and headquartered in Zug, Switzerland, MediBank AG (MediBank) provided private banking services to US taxpayers and assisted in the evasion of US tax obligations by opening and maintaining undeclared accounts. In furtherance of a scheme to help US taxpayers hide assets from the IRS and evade taxes, MediBank failed to comply with its withholding and reporting obligations, providing “hold mail” services and offering numbered accounts, thus reducing the ability of US authorities to learn the identity of the taxpayers.
After it became public that the Department of Justice was investigating UBS, MediBank hired a relationship manager from UBS and permitted some of that person’s US clients to open accounts at MediBank. Since August 1, 2008, MediBank had 14 US related accounts with assets under management of $8,620,675. MediBank opened, serviced and profited from accounts for US clients with the knowledge that many likely were not complying with their US tax obligations.
MediBank will pay a penalty of $826,000.
LBBW (Schweiz) AG (LBBW-Schweiz) was established in Zurich in 1995. Since August 2008, LBBW-Schweiz held 35 US related accounts with $128,664,130 in assets under management. After it became public that the department was investigating UBS, LBBW-Schweiz opened accounts from former clients at UBS and Credit Suisse.
Despite its knowledge that US taxpayers had a legal duty to report and pay tax on income earned on their accounts, LLB permitted undeclared accounts to be opened and maintained, and offered a variety of services that would and did assist US clients in the concealment of assets and income from the IRS.
These services included following US accountholders instructions not to invest in US securities and not reporting the accounts to the IRS and agreeing to hold statements and other mail, causing documents regarding the accounts to remain outside the United States.
LBBW-Schweiz will pay a penalty of $34,000.
Headquartered in Basel, Switzerland, Scobag Privatbank AG (Scobag) was founded in 1968 to provide financial and other services to its founders, and obtained its banking licence in 1986. Since August 2008, Scobag had 13 US related accounts, the maximum dollar value of which was $6,945,700. Scobag offered a variety of services that it knew could and did assist US clients in the concealment of assets and income from the IRS, including “hold mail” services and numbered accounts.
Scobag will pay a penalty of $9,090.
In accordance with the terms of the program, each bank mitigated its penalty by encouraging US accountholders to come into compliance with their US tax and disclosure obligations. While US accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.
Most US taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts. On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.
With Thursday’s announcement of these non-prosecution agreements, noncompliant US accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
“These four additional bank agreements signal a change in terrain for offshore banking,” said Chief Richard Weber for the IRS-Criminal Investigation (CI). “No longer is it safe to hide money offshore and expect that it will not be discovered. IRS CI Special Agents will continue to follow the money to find those who circumvent the offshore disclosure laws and hold them accountable.”