Wednesday, September 16, 2015

Another Swiss Bank Obtains NPA Under DOJ Swiss Bank Program (9/16/15)

On September 15, 2015, DOJ announced here that Bank La Roche & Co AG ("La Roche"), has entered an NPA under the DOJ program for Swiss banks.  La Roche will pay  a penalty of $9.296 million penalty.  Here are key excerpts.
La Roche was founded in 1787 and is based in Basel, Switzerland, with offices in Olten and Bern, Switzerland.  In 2011, La Roche closed a Hong Kong asset management subsidiary that opened in 2008.  On Feb. 13, 2015, La Roche sold its business to Notenstein Privatbank AG.  Most of La Roche’s employees and the clients of La Roche, with the exception of U.S. taxpayers and a few other clients, will be transferred to Notenstein Privatbank AG.  The transaction is expected to close in October 2015.  Thereafter, La Roche intends to wind down its remaining business and relinquish its banking license. 
La Roche assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the Internal Revenue Service (IRS).  La Roche used a variety of means to assist some U.S. clients in concealing the assets and income the clients held in their La Roche undeclared accounts, including by: 
  • providing numbered accounts for 70 U.S. taxpayers; 
  •  holding bank statements and other mail relating to 66 U.S.-related numbered accounts, as well as 20 named accounts of U.S. taxpayers domiciled in the United States; 
  •  allowing substantial cash and precious metal withdrawals in connection with the closures of 27 U.S. taxpayers’ accounts for a total amount of $11.6 million; 
  •  maintaining records in which certain U.S. taxpayers expressly instructed La Roche not to disclose their names to the IRS; 
  •  providing travel cash cards to five U.S. taxpayers upon their request; and 
  •  opening an account in June 2010 for a U.S. taxpayer who left UBS and who transferred $126,000 from UBS to the La Roche account.
In 51 instances, La Roche maintained accounts for U.S. taxpayers as beneficial owners of accounts held by non-U.S. corporations, foundations or other entities, some of which were sham entities, that concealed the beneficial ownership of the U.S. taxpayers.  These entities included Liechtenstein foundations, two of which were established or administered by a Liechtenstein trust company, whose manager and director had a long-standing personal relationship with La Roche. 
Due in part to the assistance of La Roche and its personnel, and with the knowledge that Swiss banking secrecy laws would prevent La Roche from disclosing their identities to the IRS, some U.S. clients of La Roche filed false and fraudulent U.S. Individual Income Tax Returns (IRS Forms 1040), which failed to report their interests in their undeclared accounts and the related income.  Some of La Roche’s U.S. clients also failed to file and otherwise report their undeclared accounts on Reports of Foreign Bank and Financial Accounts (FBARs). 
As part of its participation in the Swiss Bank Program, La Roche provided information concerning 10 U.S. client accounts held at La Roche in Switzerland since August 2008 sufficient to make treaty requests to the Swiss competent authority for U.S. client account records.  It also provided a list of the names and functions of individuals who structured, operated or supervised the cross-border business at La Roche. 
Since Aug. 1, 2008, La Roche maintained 201 U.S.-related accounts with a maximum aggregate value of approximately $193.9 million.  136 of these accounts were beneficially owned by U.S. clients domiciled in the United States, 36 of which were maintained in the names of entities.  La Roche will pay a penalty of $9.296 million.
In accordance with the terms of the Swiss Bank Program, La Roche 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 La Roche 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 La Roche must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
La Roche 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 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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