Thursday, July 2, 2015

Another Swiss Bank Enters NPA Under US DOJ Swiss Bank Program (7/2/15)

DOJ just announced here another Swiss Bank NPA resolution under the DOJ program for Swiss banks.  The Swiss bank is Privatbank Von Graffenried AG.  The penalty is $287,700.  Here are key excerpts (emphasis supplied by JAT):
According to the terms of the non-prosecution agreement signed today, Von Graffenried agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Von Graffenried for tax-related criminal offenses.  Von Graffenried also has provided certain account information related to U.S. taxpayers that will enable the government to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders. 
Von Graffenried is a private bank founded in 1992 and based in Bern, Switzerland.  Starting in at least July 1998, Von Graffenried, through certain practices, assisted U.S. taxpayer-clients in evading their U.S. tax obligations, filing false federal tax returns with the Internal Revenue Service (IRS) and otherwise hiding assets maintained overseas from the IRS. 
Von Graffenried opened and maintained undeclared accounts for U.S. taxpayers when it knew or should have known that, by doing so, it was helping these U.S. taxpayers violate their legal duties.  Von Graffenried offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS.  For example, Von Graffenried would hold all mail correspondence, including periodic statements and written communications for client review, thereby keeping documents reflecting the existence of the accounts outside the United States.  Von Graffenried also offered numbered account services, replacing the accountholder’s identity with a number on bank statements and other documentation that was sent to the client.  
In late 2008 and early 2009, Von Graffenried accepted accounts from two European nationals residing in the United States who had been forced to leave UBS and Credit Suisse, respectively.  At the time it accepted the accounts, Von Graffenried knew that UBS was the target of an investigation by the Department of Justice.  It also knew that both individuals had been forced to leave their respective banks because the banks were closing their accounts, and that both individuals had U.S. tax obligations and did not want the accounts disclosed to U.S. authorities.  Senior management at Von Graffenried approved the opening of these accounts.  
When Von Graffenried compliance personnel sought to obtain an IRS Form 8802, Application for U.S. Residency Certification, from one of the accountholders, that accountholder replied that completing the form would be problematic for him and that he believed the relationship manager knew why.  The beneficial owner of the second account was referred by an external fiduciary, who handled the account at Credit Suisse.  The fiduciary told a Von Graffenried relationship manager that Credit Suisse was attempting to exit its U.S. offshore clients to other banks if the clients would not sign an IRS Form W-9.  The relationship manager agreed to take on the account, which was held by a Liechtenstein “stiftung,” or foundation, with the beneficial owner as the primary beneficiary and U.S. citizens as other beneficiaries. 
Between July 1998 and July 2000, Von Graffenried accepted approximately two dozen accounts from a specific external asset manager.  Von Graffenried was aware that the external asset manager seemed to be targeting U.S. clientele.  Sixteen of the accounts were beneficially owned by individuals with U.S. tax and reporting obligations, and most of those accounts were held by U.S. citizens residing in the United States.  At the time, Von Graffenried did not have a policy in place that required U.S. clients to show tax compliance.  Consequently, Von Graffenried accepted these accounts without obtaining IRS Forms W-9 or assurances that the accounts were in fact tax compliant.  By early 2009, Von Graffenried determined that some of the external asset manager’s accountholders likely were attempting to evade U.S. tax requirements.  In 2010, Von Graffenried began to close the existing U.S.-related accounts that originated with the external asset manager.  Von Graffenried did not complete the exit process for these accounts until late 2012. 
Since Aug. 1, 2008, Von Graffenried held a total of 58 U.S.-related accounts with approximately $459 million in assets.  Von Graffenried will pay a penalty of $287,000.
In accordance with the terms of the Swiss Bank Program, Von Graffenried mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at Von Graffenried 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 U.S. 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 Aug. 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 today’s announcement of this non-prosecution agreement, noncompliant U.S. accountholders at Von Graffenried must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Von Graffenried will be added to the IRS's Foreign Financial Institutions or Facilitators, here (not added as of 7/2/15 9:34 pm).

I will not update the statistics since only one bank has been added and the penalty is so low.  I will provide updated statistics on the next DOJ announcement which would likely be next week, given the July 4 holiday.

Addendum 7/2/15 12:30pm:

A reader, Jin SEO (which I presume is a pseudonym), just commented on the following quote from the Statement of Facts attached to the NPA.  The quote is from p. 3 of 7 for the Statement (p. 11 of 17 of the pdf file combining the NPA and Statement).  I have added the bold-facing.
13. During the Applicable Period, Von Graffenried held a total of 58 U.S. Related Accounts with a peak value of assets under management of approximately $459 million. Of that, approximately $426 million was held in five accounts associated with a dual Swiss-U.S. citizen and longtime resident of Switzerland who was a U.S. person until 2012, when the individual expatriated. The remaining 53 U.S. Related Accounts had a total peak value of approximately $33 million.
I encourage readers to read JinSEO's comments below.  Obviously, DOJ Tax and the IRS paid special attention to that person.  I infer that, since the Bank's penalty is so low, it was able to get a reduction because that person came into compliance or was originally in compliance.


  1. Jack,

    Please note this from NPA (Page 11 of 17):

    Of that, approximately $426 million was held in five accounts associated with a dual Swiss-U.S.
    citizen and longtime resident of Switzerland who was a U.S. person until 2012, when the
    individual expatriated.

    $426M by one person. One has to wonder if this is Tina Turner or Denise Rich (Marc Rich's ex-wife).

  2. The IRS issues a 'Quarterly Publication of Individuals, Who Have Chose to Expatriate, as Required by Section 6039G" in the Federal Register. The list of the fourth quarter of 2012, which appears at page 10692 of issue 31 of volume 78 of the Federal Register, does not have either a "Turner" or "Rich". Anyone want to check the other three 2012 quarterly lists?

    It was very possibly Denise Rich - see the attached blog link.
    The funny thing about resident based taxation is that it encourages the well-to-do to expatriate. I find it unlikely that any of the expatriates will go back to or invest in the US in the future. Had they been allowed to keep their passports, some might have returned. The policy pushes out the wealthy, successful people and the people fighting to get US citizenship seem to be mostly manual laborers.
    The US should reconsider CBT. How much would it cost to switch to RBT? I think it would be a very insignificant percentage of total tax revenues especially considering the enforcement costs. CBT has also created a lot of ill will and problems for the image of the US. Plus, it is not an international standard way of doing taxes.
    I could go on but it is time for my diner.

  4. The other thing that came up in discussions was: What ever happened to Roger Keller from Wegelin? He was arrested in Germany when attempting to board a plan in early February. A decision regarding extradition must have been held by now.
    The other missing Swiss banker is Peter Amrein. He was supposed to be sentenced on July 1.
    In both cases there has been no news. Does anybody have any idea of what happened to these two?

  5. Those reports are notoriously behind/incorrect.

    Google will yield media results that clearly show Denise Rich expatriated in 2012. Tina Turner is a little unknown as she made it known in very early 2013 she was going to expatriate. The question is if she actually did it in 2012 and not 2013 and was merely starting a PR campaign to prep the world for when it was revealed.

    Ether way, this is $450M (close to a 1/2 billion dollars) that will never return to the USA... Expatriation tends to make a person not want to do anything else with or in the USA.

  6. The “International Taxation Committee” has released it’s report on tax reform. In spite of the fact that more than 3/4 of the submissions were from Overseas Americans, the committee, acknowledged, but failed to address the intolerable treatment of Americans abroad.

    As barely, a footnote, the Committee ended with:

    F. Overseas Americans

    to working group submissions, there are currently 7.6 million American
    citizens living outside of the United States. Of the 347 submissions
    made to the international working group, nearly three-quarters dealt
    with the international taxation of individuals, mainly focusing on
    citizenship-based taxation, the Foreign Account Tax Compliance Act
    (FATCA), and the Report of Foreign Bank and Financial Accounts (FBAR).

    the co-chairs were not able to produce a comprehensive plan to overhaul
    the taxation of individual Americans living overseas within the
    time-constraints placed on the working group, the co-chairs urge the
    Chairman and Ranking Member to carefully consider the concerns
    articulated in the submissions moving forward.

    What does this mean?

    At a bare minimum it means that:

    1. The “International Committee” views its purpose as dealing with “corporate interests” and not “individual interests”.

    2. The “International Committee” views DNA Americans as less important than “Corporate Americans”.

    3. The “International Committee” has acknowledged the urgency of the situation “for the international taxation of individuals, mainly focusing on citizenship-based taxation, the Foreign Account Tax Compliance Act (FATCA), and the Report of Foreign Bank and Financial Accounts (FBAR).”

    Remember that many of the same submissions that were sent to the “International Committee” were also sent to the committee focusing on “Taxation of Individuals”. It’s difficult to see how this could not be addressed further by that Committee.

    In terms of where to go from here …

    1. There will (in the very near future) be a lawsuit launched in the United States against the most egregious aspects of U.S. tax policy as they relate to Americans abroad.

    2. The lawsuit is likely to include issues related to the “forced imposition of U.S. citizenship” on people who do NOT regard themselves as U.S. citizens or “U.S. persons”.

    3. The lawsuit will NOT be run by or through the “Alliance For The Defence of Canadian Sovereignty” (which will “stay at home” dealing with the FATCA lawsuit). It will be run by and funded by a different organization.

    4. We hope for the support of all the various groups deemed by the U.S. Government to be “Americans abroad”. “If Americans abroad do NOT hang together, they will hang separately“.

    Evaluating your personal situations …

    It’s obvious that “U.S. citizenship abroad” lies somewhere between “difficult and impossible” (depending on your personal circumstances). The report from the “International Committee” suggests that the “plight of Americans abroad” is NOT likely to get better soon. This reality
    raises the obvious question of whether it’s safe to retain U.S. citizenship in a FATCA and FBAR world.

  7. Apparently, as of June 22 at least, Keller is still in jail in Germany: (in German).

  8. Thank you Jack. That is a long time to sit in jail awaiting extradition. Maybe he is contesting the extradition.


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