A. Any Swiss BankI guess that the use of the word "may" offers some wiggle room for banks to argue / spin that joining Category 2 is protective only and not an admission of guilt of violating U.S. law. Consider the following article: Peter Siegenthaler, Zug bank says US disclosure is not a guilty plea (Swissinfo.ch 12/27/13), here. Key excerpts are:
1. as to which the Tax Division has not authorized a formal criminal investigation concerning its operations as of August 29, 2013 (i.e., that is not a Category 1 Bank);
2. that is not a Category 4 Bank; and
3. that has reason to believe it may have committed tax-related offenses under Titles 18 or 26, United States Code, or monetary transactions offenses under §§ 5314 or 5322, Title 31, United States Code, in connection with undeclared U.S. Related Accounts held by the Swiss Bank during the Applicable Period,
Category Two banks acknowledge that they may have some US assets on their books and may be liable for fines even if they only have a single US tax evader as a customer.
Pascal Niquille, chief executive officer of Zug Cantonal Bank, explains why his institution has opted for this category.
swissinfo.ch: Banks which are classified in Category Three, like Bank Vontobel, are giving themselves a clean bill of health. Is classification in Category Two, on the other hand, the same as a guilty plea?
Pascal Niquille: This opposite conclusion is invalid and superficial. The range of banks classified in Category Two is very broad in terms of the business model.
At one end there are banks, such as the Zug Cantonal Bank, which never really pushed this business and were never active in the American market. If you happen to be in a very international place like Zug where there are people from 127 countries, it is normal that there will also be people from the US. At the other end of the spectrum, there are banks that have actively pursued business with customers in the US and still are.
swissinfo.ch: What considerations were key to your decision?
P.N.: The criteria for the classification into these categories are so narrow that even a bank with a single case in which a US customer has not fulfilled his tax liability should not be classified in Category Three or Four. It is consistent with our risk behaviour to err on the side of caution.
swissinfo.ch : In your communiqué, you write that Zug Cantonal Bank cannot rule out it may have been sporadically involved in customers’ tax offences. With this passive formulation are you implying that the bank may have been drawn into a customer’s offence but certainly hasn’t actively contributed to it?
P.N.: This is about customers who have ties to the US, who are taxable in the US and may not have properly fulfilled their tax obligations. Just maintaining a relationship with such customers could already amount to “support for non-compliance of legal requirements” as far as the US is concerned.
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swissinfo.ch: How big a share of all customers are US customers at Zug Cantonal Bank?
P.N.: A fraction of a per cent. It’s about so-called US persons. This includes not only customers who live in the US, but also, for example, dual nationals who were born in canton Zug and have always lived here. Until now, they were not obliged to inform us of their US passport, but are taxable in the US and may not have complied with this obligation.
* * * *
swissinfo.ch: And you now have to notify the DOJ as to where these clients have moved?
P.N.: Yes, the so-called “leaver lists” are part of the information that we have to provide to the DoJ. In this case, however, no customer names will be given, just transaction details.
swissinfo.ch: And do you think that consequences from the past will be settled with this programme, or do you still reckon with civil liability?
P.N.: This question is premature. We cannot even say whether we have consequences from the past and if so, what would this mean.
swissinfo.ch: What are the risks for employees? Can you and your staff travel abroad without concern, even to the US?
swissinfo.ch [Sic - P.N.]: Under this programme, we are cooperating with the Swiss and US authorities. So there is no reason for us to have any travel restrictions.Zug is not the only Swiss bank publicly atttempting to mitigate the consequences of its accepting a consequences as if it were a real bad actor, while proclaiming or at least suggesting that it is not really a bad actor.
In U.S. law, these protestations of innocence or at least not guilt are like the Alford plea or the nolo contendere plea. The following is a brief introduction on those concepts (from my Federal Tax Crimes book):
The types of pleas allowed are not guilty, guilty, and nolo contendere (which means, essentially, I’ll take conviction but won’t plead guilty and won’t admit my guilt). Nolo contendere pleas must be approved by the court, and many courts will not approve them because they equivocate on criminal culpability. More importantly, DOJ Tax has a policy of not agreeing to nolo pleas in tax cases. A plea of guilty may also be made where the defendant denies guilt or equivocates as to his guilt. This is called an Alford plea, named for the Supreme Court decision in North Carolina v. Alford, 400 U.S. 25 (1970). DOJ Tax also has a policy of generally not agreeing to Alford pleas. It is beyond the scope of this book to discuss the social and judicial utility of nolo contendere and Alford pleas. I do note that a sentencing judge who accepts the Alford plea will be comforted by the requirement that there be on the record a factual basis for the plea, which will usually come from a presentation by the prosecution plus such other questioning and evidentiary demands of the sentencing judge. Note that the nolo contendere is less troublesome to the sentencing judge because the defendant is not denying guilt, but even for nolo contendere pleas the prosecutor must insure that there is a factual basis for the plea.Some of the banks doing these spinnings say -- I guess consistently with the spin -- that they may re-classify to Category 3 later. I suspect that, in most cases, the Category 2 banks will not re-classify. And, if the quantum of potential accounts and amounts is really low as some of these spinning banks claim, the penalty cost will not be that great.