Thursday, August 20, 2015

Two More Banks Obtain NPAs under DOJ Swiss Bank Program (8/20/15)

On August 20, 2015, DOJ announced here two other Swiss Banks have entered NPA resolutions under the DOJ program for Swiss banks.  The Swiss banks and their respective penalties are:

bank zweiplus ag (Bank Zweiplus)
$1.089 million
Banca dello Stato del Cantone Ticino (Banca Stato)
$3.393 million

Key excerpts are (bold-face supplied by JAT):
Bank Zweiplus was founded in July 2008 as a retail bank based in Zurich.  Offices located in Geneva and Basel, Switzerland, were closed in 2008 and 2012, respectively.  Since Aug. 1, 2008, Bank Zweiplus maintained and serviced 44 U.S.-related accounts with an aggregate value of approximately $12.1 million.  
Bank Zweiplus was aware that U.S. taxpayers have a legal duty to report to the Internal Revenue Service (IRS) their ownership of bank accounts outside the United States and to pay taxes on income earned in such accounts.  Nevertheless, in disregard of U.S. laws, the bank provided a variety of traditional Swiss banking services that assisted some U.S. taxpayers in concealing their undeclared accounts.  For example, Bank Zweiplus maintained numbered accounts and accounts held in the name of structures which were effectively owned or controlled by U.S. persons, including structures in the British Virgin Islands and the Bahamas. 
Bank Zweiplus cooperated with the department during its participation in the Swiss Bank Program and encouraged its U.S. clients to enter the IRS Offshore Voluntary Disclosure Program.  Bank Zweiplus will pay a penalty of $1.089 million. 
Banca Stato was established in 1915 and is headquartered in Bellinzona, Switzerland.  Banca Stato was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on the basis of all of their income, including income earned in accounts that the U.S. taxpayers maintained at the bank.  Despite this, the bank opened and serviced accounts for U.S. clients who the bank knew or had reason to know were not complying with their U.S. income tax obligations.  
In 2001, Banca Stato entered into a Qualified Intermediary Agreement with the IRS.  In 2001, the bank issued an internal directive prohibiting U.S. persons without a Form W-9 on file with the bank from buying U.S. securities.  However, prior to 2011, Banca Stato’s relationship managers were not instructed to, and did not, evaluate or screen incoming U.S. clients for U.S. tax compliance status.  At that time, more than 70 percent of the assets under management were related to U.S. accountholders who had not provided a Form W-9 to the bank. 
In 2011, Banca Stato implemented a project that it called “Colombo” to change the manner in which it handled U.S. clients.  The bank recognized both risks and rewards of handling U.S. clients.  As to the former, the bank recognized that “[w]e can no longer have clients who are U.S. Persons who have not signed the W-9 form.”  But the bank also recognized an opportunity to attract new U.S. clients because many Swiss banks declined to service U.S. persons from Ticino, Switzerland, and the bank perceived “a huge demand from fully tax-compliant U.S. Persons . . . attracted by the brand BancaStato (especially because we have no branches in the US).” 
Banca Stato entered into a relationship with a Lugano-based U.S. Securities and Exchange-registered investment advisory firm to partner in attracting U.S. persons living and working in the Ticino region who could not open or maintain accounts at other institutions.  The bank paid the firm a one-time finder’s fee of 0.5 percent on the incoming funds.  Despite the bank’s decision to refuse to open new accounts of U.S. persons without a Form W-9, it did not always adhere to this policy. 
Banca Stato offered a variety of traditional Swiss banking services that it knew would and in certain instances did assist U.S. clients in concealing assets and income from the IRS, including hold mail and code name or numbered accounts.  In addition, the bank employed a variety of other means or conduct that it knew or should have known would assist U.S. taxpayers in concealing their Banca Stato accounts, including opening accounts for U.S. taxpayers who left other banks being investigated by the department and allowing U.S. clients to direct repeated wire transfers between $9,000 and $9,900 in an effort to conceal their Swiss bank accounts from U.S. authorities. 
During the applicable period, Banca Stato maintained and serviced 187 U.S.-related accounts with an aggregate maximum balance of approximately $137 million.  Banca Stato will pay a penalty of $3.393 million. 
* * * * 
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.
These banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  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).

The 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.

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