Swiss Banks Scramble to Mitigate U.S. Penalties (4/17/15)

BloombergBusiness has an article describing the banks actions to mitigate the penalty under the U.S. DOJ Program for Swiss Banks.  Giles Broom and David Voreacos, Swiss Banks Strong-Arm Clients in U.S. Tax-Evasion Endgame (BloombergBusiness 4/14/15), here.  From my perspective, the interesting excerpts are:

Faced with the threat of penalties that could bankrupt some of them, almost 100 of the country’s banks are calling thousands of U.S. clients in an 11th-hour push to get them to disclose any offshore accounts they may be hiding. Customers are being asked to prove they have paid any taxes due, according to a dozen lawyers for banks or their customers. Some have even had their accounts partially blocked to force them to comply, according to the Swiss banking ombudsman. 

As the U.S. government’s largest crackdown on offshore tax evasion enters its final stretch, the banks are trying to reduce any fines they face. Under the amnesty program, if banks can’t show clients paid any taxes owed, the government will assume they didn’t -- and fines will be larger. U.S. prosecutors have already put one bank out of business over tax evasion: Wegelin & Co., Switzerland’s oldest private bank, closed in 2013 after being indicted. 

* *  * * 

Several banks are using tactics clients consider as strong-arming, such as blocking funds or threatening to reveal names, said Thierry Boitelle, a lawyer with Bonnard Lawson in Geneva. He has advised U.S. taxpayers and Swiss private banks involved in the program.
“We have seen banks making withholdings on U.S. client accounts,” he said. “They’re holding back 25 to 30 percent of the funds to compensate for potential fines.” 

Switzerland’s banking ombudsman said it received a “handful” of complaints of accounts being frozen. Banks ascribe such actions to uncertainty over whether a client controlled an account or because he tried to withdraw all holdings in cash instead of making wire transfers, said deputy ombudsman Rolf Wuest. 

Still Resisting 

As clients aren’t legally required to help, many banks have agreed to pay legal costs that sometimes reach tens of thousands of dollars, lawyers say. 

In some cases, customers are still resisting, saying they paid banks high fees for holding money in confidence. 

“Some clients felt that they were misled by the bank as far as secrecy was concerned, and that’s left them with no reason to cooperate,” said Leigh Kessler, a former tax prosecutor now at Rosenberg Martin Greenberg LLP, a Baltimore firm advising some Americans who received calls. 

Customers who are tax compliant can also be uncooperative, said Larry Campagna, tax attorney for Chamberlain, Hrdlicka, White, Williams & Aughtry. The Houston-based firm has represented about 100 clients in connection with the program. 

“They would say, ‘I’m finished with this bank,’” he said. “‘I’m right with my government, I don’t care what happens to the bank. Go jump in the lake and don’t call me again.’”

JAT Comment:  I had thought the window had long passed that the Swiss banks could get the proof required to mitigate the penalties.  But, recently, at least one bank has made inquiries that, while not acknowledging that the bank was seeking penalty mitigation, that seemed to the focus of the inquiries.