David Voreacos and Giles Broom, Swiss Banks Employ Army of Advisers for U.S. Amnesty Plan (Bloomberg 12/22/13), here. Key excerpts:
Switzerland’s 300 banks have enlisted an army of auditors, lawyers and in-house workers as they race to meet a Dec. 31 deadline on whether to seek U.S. amnesty for helping American clients evade taxes.
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“The hard work is getting to the right data and cutting through complex systems to get all the facts on the table,” said David Fidan, a partner in Deloitte LLP’s forensic services practice in Switzerland. “That’s very expensive and involves lawyers, forensic accountants and bank employees. It can take 20, 30 or 40 people over four or five months for bigger banks.”
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“It’s necessary for the banks to do a deep analysis of their clients and the history of those relationships,” said SBA spokeswoman Sindy Schmiegel. “That’s really expensive, and that’s why the program is at the limit of tolerability for the banks. It’s really a painful program.”
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To gain non-prosecution deals, banks must pay 20 percent of the value of accounts not disclosed to the IRS on Aug. 1, 2008, 30 percent for such accounts opened between then and February 2009 and 50 percent for accounts opened afterward.
“The view seems to be that the penalty rates for this program came out way too high,” said Milgrim, who is advising a Swiss bank. “A lot of banks are having difficulty deciding whether to go into a program which doesn’t take into account the level of culpability and instead treats all banks the same.”
“Most of the banks are going to category 2,” said Fidan. “The DOJ has already stated numerous times that if you’re unsure, you should file for a category 2. Clearly, if you file as a category 2 and cooperate with the U.S., from a governance perspective, your risk is much lower.”
The advisers scouring electronic records seek to find which accounts among thousands were held by U.S. clients who didn’t declare assets. They search for U.S. citizens or residents. They sift for those born in the U.S. or have U.S. addresses, phone numbers, or instructions to transfer funds there. The bank may also try to reach customers to clarify their status.
“Most of these accounts are closed,” Fidan said. “You need to reach out to a customer with whom you don’t have a relationship anymore. Everything can be handled. It’s just a matter of resources and time. The problem is resources are scarce and you don’t have that much time.”
After evaluating their accounts, banks must weigh whether to enter the program or risk detection by the U.S. if they don’t, said attorney Lawrence Hill of Shearman & Sterling LLP. His firm advises some Swiss banks and is seeking to work as an independent examiner for others.
“If they’ve done adequate due diligence and evaluation, they may decide they have no risk or minimal risk,” Hill said. “If they feel they have some risk, they may decide to go into the program. It’s a complicated equation.”
One unknown variable for banks is the 38,000 clients who told the IRS all about their offshore accounts.
“The DOJ is basically saying to the banks that if you don’t come into this program and you have customers that went into the voluntary disclosure program, you could be in our sights,” Hill said. “That’s part of what the banks have to evaluate when they decide whether to participate.”Caroline Copley., Swiss regulator recommends banks take provisions for U.S. tax deal (Reuters 12/24/13), here.
Banks have offered various explanations on their decision.
Swiss banks should set aside funds to cover the legal costs and fines associated with a crackdown on Swiss lenders suspected of helping wealthy Americans evade taxes, the country's financial regulator has recommended.
The regulator FINMA said it was "generally recommended" that banks book provisions for the 2013 financial year, a FINMA spokesman said, referring to a letter sent to the Swiss Banking Association and the Institute of Certified Accountants and Tax Consultants on Monday.
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Swiss banks have until the end of the year to sign up to the program which requires the banks to hand over some previously hidden information and face penalties equivalent to up to 50 percent of the assets they managed on behalf of wealthy Americans.
Many banks have come forward to say they will take part in the program, including Geneva-based Banque Privee Edmond de Rothschild and EFG International.
The success of the scheme, open to a host of second-tier banks in Switzerland, is key for a future settlement for 14 larger Swiss banks being investigated. Among those under investigation are Credit Suisse, Julius Baer, Pictet, local government-backed Zuercher Kantonalbank (ZKB) and Basler Kantonalbank.