Thursday, July 9, 2015

Two More Swiss Banks Enter NPAs Under US DOJ Swiss Bank Program (7/9/15)

DOJ just announced here two other Swiss Banks have entered NPA resolutions under the DOJ program for Swiss banks.  The Swiss banks are Banque Pasche SA and ARVEST Privatbank AG.  The penalties are  $7.229 Million and $1.044 Million, respectively.  Here are key excerpts (emphasis supplied by JAT):
Banque Pasche SA is headquartered in Geneva, Switzerland, and owns and controls a group of companies in various jurisdictions, including Monaco and the Bahamas.     From at least August 2008 to August 2013, Banque Pasche assisted certain U.S. taxpayers in evading their U.S. taxes and filing obligations, filing false income tax returns with the IRS and hiding offshore assets from the IRS. 
Banque Pasche offered a variety of traditional Swiss banking services that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS.  For example, Banque Pasche offered hold mail service, as well as code name or numbered account services.  These services allowed certain U.S. taxpayers to minimize the paper trail associated with their undeclared assets and income. 
Banque Pasche also permitted certain U.S. taxpayers to open accounts held in the name of sham, conduit or nominee offshore structures where the U.S. taxpayer’s interest in the account was not reported to the IRS.  With respect to these accounts, Banque Pasche would obtain from the entity’s directors an IRS Form W-8BEN (or equivalent bank document) that falsely declared that the beneficial owner was not a U.S. taxpayer.  As of Dec. 31, 2008, Banque Pasche had U.S.-related accounts held by entities created in Panama or the British Virgin Islands with U.S. beneficial owners.  The majority of these accounts had false IRS Forms W-8BEN in the file. 
Banque Pasche also opened accounts for U.S. taxpayers who had left other Swiss banks that were being investigated by the department, including UBS and Credit Suisse.  Banque Pasche knew or should have known that the beneficial owners of the majority of these accounts were attempting to evade U.S. tax and foreign account reporting requirements.  Many of these accounts were held by Panamanian corporations with U.S. beneficial owners.  Some of these accounts were managed by a particular Geneva-based attorney who held a power of attorney over them.  When these accounts were subsequently closed, the assets were transferred to banks located in Israel and Hong Kong in an attempt to further escape detection from U.S. authorities. 
Banque Pasche has fully cooperated with the department during its participation in the Swiss Bank Program.  For example, it described in detail the structure of its business with U.S. persons, which included the policies concerning U.S. accountholders.  Banque Pasche also provided the names of members of its management committee and information about its relationships with external asset managers. 
Since Aug. 1, 2008, Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million.  Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million.  Banque Pasche will pay a penalty of $7.229 million. 
ARVEST Privatbank AG was a private bank headquartered in Pfaffikon, Switzerland.  It provided portfolio management and related private banking services primarily to high net worth clients.  On April 15, 2015, it ceased being a licensed Swiss bank. 
ARVEST opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as required by U.S. law.  The bank helped clients set up entities, including trusts and foundations, in Liechtenstein, St. Kitts and other jurisdictions, with bank representatives serving as officers of certain of these entities, and opened ARVEST accounts in the names of these entities. 
For several U.S. customers, ARVEST gave the accountholders a travel debit card, which did not have a name imprinted on the card.  These cards were tied to accounts that the accountholders held in their names at a third-party Swiss Bank specializing in this service. 
Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million.  ARVEST will pay a penalty of $1.044 million. 
In accordance with the terms of the Swiss Bank Program, each bank 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 these banks 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 these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
Banque Pasche SA and ARVEST Privatbank will be added to the IRS's Foreign Financial Institutions or Facilitators, here (not added as of 7/9/15 12:00pm).  As indicated in the last quoted paragraph, accountholders in the listed banks will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).

My updated statistics are:

US DOJ Swiss Bank Program
Number Resolved
Total Costs
   U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *
   U.S. / Swiss Bank Initiative Category 2 **
   U.S. / Swiss Bank Initiative Category 3

   U.S. / Swiss Bank Initiative Category 4

Swiss Bank Program Results


* Includes subsidiary or related entities counted as separate entities, so the numbers may exceed the numbers the IRS and DOJ posted numbers which combine some of the entities.

** DOJ says original total was 106 but that it expects about 80 to complete the process.


  1. Ms. Moon - I could not have said it better - thank you for saying it like it is. I have lived overseas, as a patriotic flag waiving American that has served his country, for almost two decades, but today I have never felt so alone, so isolated and so betrayed by the US government due to what is simply stated, a Jihad, against US citizens living abroad. I made a very comprehensive submission to the US Senate Finance Committee, as did hundreds of others similarly situated, with the hope that the unfairness, the persecution and the positive discrimination against 'US Persons' living outside the US caused by the US policies of Citizenship Based Taxation, FATCA and FBAR would be addressed - and a recommendation to move for the US to move to the world standard of Residence Based Taxation would be made. Nothing but a 'nod' to study the issues further!

    I have NO desire to give up my US citizenship, but I am left with NO choice but to take that step in order to live a normal life, with the same financial, savings and retirement options as my non US neighbors. A US passport for anyone living outside the USA is the most financially toxic passport in the world - and it is the US government's fault - and no one else. The US government caused this to happen.

    Anyone with any real interest in the issues and problems caused by the current US tax policy should read the submissions of Americans, like myself, who each day are faced with having to deal with the horrible consequences of Citizenship Based Taxation, FATCA and FBAR.

    The US government - including the Treasury, the IRS, the Dept of State and the Congress have to date demonstrated irresponsibility in not standing up and saying to the Congress and the President "Hey, there is a serious problem here - it's unfair, and harming Americans and their international families abroad, and we need to change this". Instead, we have only a deafening silence and a 'full speed ahead' in enforcing laws and policies that are not in line with the world standard of Residence Based Taxation and are creating what can only be described as horrible outcomes for those of us who want to keep our US citizenship but also live a normal life abroad like any other nationality.

    Sadly, litigation is now the only option. It will be long, expensive and tiring but there is no choice. I hope and pray that the courts will see the constitutional violations for what they are and help us force change.

    ...I seem to recall someone saying that if we elect him we will get "Hope and Change", but I have seen, unfortunately, just the opposite as it relates to US citizens living abroad.

  2. Thanks, Andre,

    I was not aware of that web site. I looked at it for 20 seconds. It appears to be a great resource. I will poke around it later this weekend and, if it is as good as it appears to be, I will put a more prominent link to it on my blog.

    Jack Townsend

  3. It's dangerous to be a US citizen abroad with CBT, FBAR and FATCA. Americans abroad who don't renounce will regret it.

    Message to the Senate Finance Committee, Congress and the Obama administration (echoing the language of Commissioner Shulman in 2011):

    This was your last, best chance to come into compliance with the moral and fiscal standards of "residence based taxation" used by the rest of the world.

  4. Well said Patricia Moon. As someone who read every single submission from overseas Americans to the Senate Finance Committee I have to wonder if they even bothered to read them. But if they did read them I have to wonder if they even have one ounce of empathy in their souls. The quantity of submissions (roughly 260 out of 347) you have explained extremely well and I would add that the quality of those submissions was overall very high, especially when you consider that they were written by "ordinary folks" (a politician's term for the general, non-elite populace). IMHO the quantity AND the quality of the overseas American submissions should have garnered much more consideration from the committee. Instead they gave these submission only the slightest of nods and kicked the CBT/FBAR/FATCA can of worms down the road, probably into the ditch so they can stride right past with their armloads of recommendations to provide relief for corporate America and perhaps a token or two for homeland tax payers. It is indeed "see you in court" time for overseas Americans and the lawsuits are underway.

  5. Yes, let us hope that by way of litigation the change will happen. Residence-based taxation is the change which will release the chains of overseas Americans. Meanwhile many more, like yourself, will be forced to disconnect from the USA by way of relinquishing their U.S. citizenship. I too blame the U.S. government but I also assign blame to all the FATCA-adopting countries which were too gutless to assert their sovereignty.

  6. Mr. Townsend, please carefully read Patricia Moon's superb comment and try hard to truly comprehend everything that she says. Your comment about this not reaching "crisis level" betrays a deep ignorance of the true state of affairs. Perhaps you have never lived outside of the United States. Perhaps you are not capable of imagining what this is like.

    Thousands of ordinary law-abiding people around the world are being targeted and abused by the US government. For many of these people this is likely the first time in their lives that they have personally experienced real injustice from any official body or institution.

    Are you not ashamed of your own government's hypocrisy? The USA considers itself the "leader of the free world", the home of truth and justice. The current US government is making a mockery of these claims.

  7. There are 5.2 million corporations registered in the United States. Less than 90 of them commented to the International section of the Senate Finance Committee. Obviously, with such intense disinterest in the US corporate population, international corporate tax reform is not a crisis, and there need not be any changes to the US international corporate tax system.

    This all represents the logic of the United States of America, and explains why it has had a trade deficit year after year, while countries such as Germany have run surpluses each year.

    But the US indeed is best at exporting financial and legal services to countries which are forced to implement US regulations.

  8. Mr. A:

    I did read Patricia Moon's comment carefully. I always do that before I approved the comment. My point on this blog, which is a not a tax policy blog, is that tax policy points have to be perceived by Congress as a crisis. As I read Congress' mood on this issue (based solely an an outsider's view), it does not think there is a crisis or a systemic problem. I am not saying that there is not a systemic problem; I am simply saying that, on the objective evidence, Congress does not perceive a systemic problem.

    As they say, Americans, including Congress, will react to systemic issues and adopt good policy, but only after it has tried everything else.

    For me alone (and keep in mind that I am not a tax policy guy), I have difficulty understanding the precise focus of the perceived problem. Is it residence based taxation alone? If that is the case, it seems to me that a narrowly focused discussion of the pros and cons of RBT and CBT could help flush out the issues and better serve the interests of all. Unfortunately, from my perspective, too much rhetoric and politics have entered the policy debate, so that the merits of the policy gets obscured.

    For example, people criticize the IRS -- a popular whipping boy -- when the IRS just administers the system of CBT Congress legislated. The problem is Congress, not the IRS. But many commenters on the policy issue whip the IRS. That does not serve their purpose to engage the real debate about RBT or CBT. We always learned in law school to keep your arguments focused for effect. (By the way, I learned that in the Army also with respect to mortars and recoilless rifles.)


    Jack Townsend

  9. Mr. A:

    Let me suggest another avenue to pursue. Many of the major American corporations which collectively have significant influence on Congress have U.S. citizens working abroad. Those corporations have a motive to lobby Congress for a good, fair tax environment for those employees. Perhaps those employees can bubble that issue up through the appropriate corporate offices -- perhaps human relations or some such -- to reach the decision makers who pay lobbyists to achieve corporate interests. Then it would not be just anecdotal complaints from U.S. citizens, but corporations telling Congress that CBT is unfair to the U.S. citizens it employs.

    Again, I can't really address meaningfully the merits of the issue, but that is one way to get Congress' attention.

    Jack Townsend

  10. This sounds like a reasonable idea to me. I have no first hand experience with this type of situation (I am a Canadian who lives in Canada). I would wonder if many of these US citizens working abroad for US corporations are only living abroad temporarily (ex. a year or two) until they return to the US. People in this situation would likely not find it too difficult to file US tax returns while they live outside of the US and are not as likely to complain to Congress. The real hardship is for people who have established lives outside of the US on a long term or permanent basis. Many of these people do not work for US corporations.

    I have seen submissions from organizations like American Citizens Abroad to Congress that explain how FATCA is hurting the global interests of the USA.

  11. Thank you for your reply. I have read comments from people experienced in hearings, discussions etc. in Washington, and they maintain that Congress is fully aware of the problem and (with a few exceptions) just does not seem to care. Congress wants to maintain a "broadened tax base" (with the $18 trillion US national debt) and US citizens living around the world have no real power in voting members of Congress out of office. (And I did write a submission to the SFC).

    Most Americans resident in the US do have trouble understanding the problem, as it does not affect the 300 million of you - you are all effectively subject to RBT. There are no "pros" to CBT - it is immoral and unjust. People should pay tax where they live and earn income - it's that simple. That's what you do.

    Consider my personal situation: Canadian citizen at birth ("born abroad" to a Canadian parent), lived in the USA for the first 3 months of my life before my Canadian father returned to Canada, bringing me and my American mother with him. I have only lived my life as a Canadian, in Canada. The US is a foreign country to me, a place for vacations or conferences. I have no US passport, no social security number. Should I be filing US tax returns and FBARS? Hardly. Yet the US government is trying to enforce CBT on me through FATCA. I can't even renounce my technical US citizenship because of the obscene financial barriers (5 years of tax returns etc.). And on principal, it is just wrong!

    Try to imagine yourself subject to CBT: how would you feel about paying taxes to a foreign country where you have never lived or worked? (in addition to your US taxes - many instances of unjust double taxation do arise).
    How would you feel about having your private financial account information sent to a foreign tax agency?

    Many of us do recognize that the IRS only enforces the US tax laws that Congress writes. In my original comment I talked about the US government, not the IRS. I hold Senators like Max Baucus, Charles Rangel and Carl Levin responsible for FATCA, along with President Obama. As they are effectively trying to steal money from law abiding citizens and residents of other countries, I have come to view them as criminals.


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