Another Swiss Bank Obtains NPA Under DOJ Swiss Bank Program (9/11/15)

On September 10, 2015, DOJ announced here that Valiant Bank AG ("Valiant"), has entered an NPA under the DOJ program for Swiss banks.  Valiant will pay  a penalty of $3.304 million penalty.  Here are key excerpts.

According to the terms of the non-prosecution agreement signed today, Valiant 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 this bank for tax-related criminal offenses. Valiant traces its origins to 1824 and is headquartered in Bern, the capital of Switzerland. Today, Valiant is the successor of 40 banks. 

Valiant offered hold mail services and numbered accounts to its U.S. clients, including some U.S. clients who had not provided Valiant with an Internal Revenue Service (IRS) Form W-9. Valiant also accepted funds from 19 UBS accountholders who exited UBS. Eleven of these 19 U.S. persons provided a signed Form W-9. The remaining eight U.S. persons who did not were later forced to close their Valiant accounts. 

For 26 accountholders who refused to sign a Form W-9, Valiant cashed out or converted into gold hundreds of thousands (and even millions) of dollars in account balances. In late November 2011, one accountholder withdrew more than one million Swiss francs in various currencies and 114,000 Swiss francs in gold coins, gold bars and precious metal. Another accountholder withdrew $2 million in cash and wired 400,000 Swiss francs to a U.S. bank. In both instances, the accountholders refused to sign a Form W-9. Other accountholders withdrew only amounts under $10,000 either by U.S. dollar cash withdrawals or by check or wire transfer to the United States, or transferred large sums to non-U.S. institutions. For example, one accountholder transferred over 435,000 euros to France and $350,000 to Luxembourg. Two other accountholders each transferred 75,000 Swiss francs to Dubai and closed their accounts with cash withdrawals of over 300,000 Swiss francs. 

In 2009, an accountholder refused to sign a Form W-9 and requested that Valiant ignore the accountholder's U.S. status. The accountholder's non-U.S. spouse later opened a separate account at Valiant, and the accountholder transferred more than $1 million into that account. According to an "Agreement of Donation" between the accountholder and the accountholder's non-U.S. spouse, the purpose of the transfer was "to make a donation" and "without any consideration." The agreement provided that the donation was "irrevocable." The non-U.S. spouse then transferred the funds to UBS and instructed Valiant to close the account. 

Some U.S.-related accounts at Valiant were held in the name of non-U.S. entities with one or more U.S. beneficial owners. In one case, a British Virgin Islands entity opened an account at Valiant through a third-party Swiss entity assigned to manage the account. The entity holding the account designated four U.S. persons as beneficial owners, but signed a Valiant form declaring that the account was for the benefit of non-U.S. persons. 

Since Aug. 1, 2008, Valiant had 330 U.S.-related accounts, out of a total of 600,000 accounts. The maximum aggregate dollar value of the U.S.-related accounts was $147.4 million. Valiant will pay a penalty of $3.304 million.

In accordance with the terms of the Swiss Bank Program, Valiant 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 Valiant 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 Valiant must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Valiant 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 joining OVDP after one of their banks are listed 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	Number Resolved	Total Costs
U.S. / Swiss Bank Initiative Category 1 (Criminal Inv.) *	17	5	$3,470,550,000
U.S. / Swiss Bank Initiative Category 2 **	79	34	$312,161,690
U.S. / Swiss Bank Initiative Category 3	14		$0
U.S. / Swiss Bank Initiative Category 4	8		$0
Swiss Bank Program Results	118		$3,782,711,690
* 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.