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Swiss Bank Becomes First To Reach Deal With US Under Cross-Border Disclosure Pact

Tom Burroughes

1 April 2015

, the Swiss private bank operating in a number of regions, including Asia, has avoided prosecution for suspected tax-related offences by paying a $211 million penalty, becoming the first bank to reach a deal in the US Department of Justice's voluntary disclosure programme, the US department has said.

In August 2013, the Swiss and US governments signed a sweeping agreement under which Swiss banks can elect to state whether they are or are not at risk of having undeclared client money. They have been able to sign up to the programme under various categories. The countries have sought to draw a line under a long-standing wrangle about Swiss banks holding undeclared assets of Americans. Many Swiss banks no longer provide offshore accounts to US citizens. In the most high-profile case to date, UBS, Switzerland’s largest bank, settled criminal and civil charges with the US authorities in 2009.

It is estimated that more than 100 out of a total of more than 300 Swiss banks and other institutions have signed up to the programme with the Department of Justice.

On 30 March, BSI said in a statement that it had reached a settlement with the DoJ. "Following a proactive and productive dialogue with the US Department of Justice,  BSI  is  the  first  “Category  2  bank”  to  reach  a  Non- Prosecution Agreement (NPA) with the DOJ under the Program for Non- Prosecution Agreements or Non-Target Letters for Swiss Banks (US Tax Program).  By entering into the NPA, BSI resolves its liability with the DOJ arising from its legacy US private banking cross-border business and pays 4211 million. The settlement is recorded in the 2014 financial statements," it said. Separately, BSI said the previously announced acquisition by BTG Pactual of the business remnained "on track".

“Because of the department’s continuing efforts to root out offshore tax evasion, Swiss banks are operating much differently today than they did just a few years ago, and the department’s Swiss Banking Program is a big part of that change,” said Acting Deputy Attorney General Sally Quillian Yates.

“When we announced the program, we said that it would enhance our efforts to pursue those who help facilitate tax evasion and those who use secret offshore accounts to evade taxes.  And it has done just that.  We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals,” Yates continued.

The US programme requires banks disclose all cross-border activities; provide details on an account-by-account basis for accounts in which US taxpayers have a direct or indirect interest; co-operate in treaty requests for account details; provide data to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed, agree to shut accounts of persons who fail to comply with US reporting rules and pay the appropriate penalties.
Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

The DoJ statement this week said that BSI helped its US clients create “sham corporations and trusts that masked the true identity of its US accountholders”.  “Many of its US clients also opened `numbered’ Swiss bank accounts that shielded their identities, even from employees within the Swiss bank.  BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many US accountholders without names visible on the card itself,” it continued.

The statement continued that the bank not only helped US clients hide their identities from the US tax authorities but also helped them to repatriate cash as well.

“BSI admitted that its relationship managers and their US clients used code words in emails to gain access to funds.  BSI disclosed instances where its US clients would use coded language, such as asking their private bankers, `can you download some tunes for us?’ or note that their `gas tank is running empty’ when they required additional cash to be loaded to their cards,” it said.

Since 2009, the DoJ said it has charged more than 100 offshore bank accountholders, dozens of facilitators, and financial institutions.

The department’s offshore enforcement efforts have reached far beyond Switzerland, as evidenced by publicly announced actions involving banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean, it said.

BSI had more than 3,000 active US-related accounts after 2008, many of which it knew were not disclosed in the US, the DoJ continued.