Two Articles on Swiss Banks (2/19/20)

This is just a miscellaneous post on Swiss Banks to report two recent articles on two different topics.

• Samuel Gerber, U.S. Tax Dispute: Swiss Banks in for More Fines? (Finews.com 2/19/20), here. The article reports on recent addenda by two Category 2 banks who reached NonProsecution Agreements (“NPAs”) under the DOJ Swiss Bank Program.  I recently reported on two incidents:  Union Bancaire Privée, UBP SA ("UBP") Enters an Addendum to its Swiss Bank Program Category 2 NPA (Federal Tax Crimes Blog 2/5/20), here; and Coutts & Co. Ltd. Enters an Addendum to its Swiss Bank Program Category 2 NPA (Federal Tax Crimes Blog 12/20/19), here.  The article speculates that there may be more to come, concluding that: “The Swiss banking industry doesn’t know how far the U.S. authorities intend to go but one observer noted that the proverbial lemon has been squeezed dry already.”  That’s their story and they are sticking to it.
• Switzerland still a hot spot to hide money, but getting better (SWI Swissinfo.ch 2/19/20), here. This article reports (excerpted from the start of the article):

The biennial Financial Secrecy Index ranks each country based on how intensely the country’s legal and financial system allows wealthy individuals and criminals to hide and launder money from around the world. The index bases each country’s secrecy score on 20 indicators, each of which is scored out of 100.  

For the first time Switzerland isn't the worst offender in the Financial Secrecy Index, which was first published in 2011. The current Financial Secrecy Indexexternal link, released by the Tax Justice Network on Tuesday, found that overall financial secrecy around the world is decreasing due to a push for more transparency. On average, countries on the index reduced their contribution to global financial secrecy by 7% since the last index in 2018. 

The Cayman Islands took the top spot followed by the US, which posted a worse score than the previous year partly because it has yet to sign up to the Common Reporting Standardsexternal link for automatic exchange. 

Switzerland’s expansion of the automatic exchange of information on clients to include over 100 countries helped the country move from first to third when it comes to opacity. According to the ranking, Switzerland reduced the risk of acting as an offshore haven by 12% from 2018. 

However, wealthy people from countries not on the list, many of which are in the developing world, can still hide their money virtually risk-free from the tax authorities in their home country by using the offshore services of banks and other financial service providers in Switzerland.

Union Bancaire Privée, UBP SA ("UBP") Enters an Addendum to its Swiss Bank Program Category 2 NPA (1/5/20)

I previously reported that Union Bancaire Privée, UBP SA ("UBP"), had entered a NonProsecution Agreement (“NPA”) with DOJ Tax under the DOJ Swiss Bank Program.  One More Swiss Bank Achieves NPA Under Swiss Bank Program (Federal Tax Crimes Blog 1/6/16), here.  Under the original NPA, UBP paid $74,5 million (rounded) in penalties.  DOJ Tax announced here that UBP has entered an addendum to the NPA after disclosing additional, previously undisclosed, accounts and agreeing to pay an additional $14 million, for a combined penalty amount of $201,767 million.

(Note:  I have added at the end of this blog entry a short discussion of a similar agreement reached with Banque Bonhôte & Cie SA that I missed earlier.)

The key excerpts for the UBP Addendum are (emphasis supplied):

The Department of Justice announced today that it has signed an addendum to a non-prosecution agreement with Union Bancaire Privée, UBP SA (UBP), a private bank headquartered in Geneva, Switzerland. The original non-prosecution agreement was signed on Jan. 6, 2016. At that time, UBP reported that it held and managed 2,919 U.S. Related Accounts, with assets under management of approximately $4.9 billion, and paid a penalty of $187,767,000. In reaching today’s agreement, UBP acknowledges it should have disclosed additional U.S.-related accounts to the department at the time of the signing of the non-prosecution agreement. 

“Foreign banks that participated in the Swiss Bank Program were obligated to identify all accounts in which U.S. taxpayers held an interest, directly or indirectly,” said Richard E. Zuckerman, Principal Deputy Assistant Attorney General for the Tax Division. “Today’s agreement reflects our continued commitment to ensuring that when entities cooperate and make disclosures to the Department, that they do so fully.” 

The Swiss Bank Program provided a path for Swiss banks to resolve potential criminal liabilities in the United States relating to offshore banking services provided to United States taxpayers. Banks eligible to enter the program were required to advise the department that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. As participants in the program, they were required to make a complete disclosure of their cross-border activities, provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers had a direct or indirect interest, cooperate in treaty requests for account information, and provide detailed information about the transfer of funds into and out of U.S.-related accounts, including undeclared accounts. 

The department executed non-prosecution agreements with 80 banks between March 2015 and January 2016. The department imposed a total of more than $1.36 billion in Swiss Bank Program penalties. Pursuant to today’s agreement, UBP will pay an additional sum of $14,000,000 and will provide supplemental information regarding its U.S.-related account population, which now includes 97 additional accounts. 

Every bank that signed a non-prosecution agreement in the Swiss Bank Program had represented that it had disclosed all known U.S.-related accounts that were open at each bank between Aug. 1, 2008, and Dec. 31, 2014. Each bank also represented that it would, during the term of the non-prosecution agreement, continue to disclose all material information relating to its U.S.-related accounts. In reaching today’s agreement, UBP acknowledges that there were additional U.S.-related accounts that it knew about, or should have known about, but that were not disclosed to the Department at the time of the signing of the non-prosecution agreement. UBP has fully cooperated with the department with respect to the additional U.S.-related accounts. 

The Addendum to the NPA is linked on the announcement and is bare bones.

JAT Comments:

1. It is not clear to me whether UBP suffered any additional cost for failing to advise DOJ Tax of the previously unreported accounts that it knew or should have known about at the time of the original NPA.  And it is not clear whether UBP eventually self-reported the undisclosed accounts or DOJ Tax and/or the IRS discovered some unreported accounts that led to UBP's cooperation.

2.  In preparing this blog entry, I discovered that I had failed to report one Addendum for Banque Bonhôte & Cie SA.  The DOJ Tax Press Release, dated 7/1/2019 is here.  The same pattern exists - failure to include in initial agreement accounts that the bank knew or should have known abuot..  The initial cost was $624,000, the Addendum added $1,200,00.  The Total is $1,824,000.

Coutts & Co. Ltd. Enters an Addendum to its Swiss Bank Program Category 2 NPA (12/20/19)

I previously reported that Coutts & Co. Ltd. (“Coutts”) had entered a NonProsecution Agreement (“NPA”) with DOJ Tax under the DOJ Swiss Bank Program.  Five More Banks Obtain NPAs under DOJ Swiss Bank Program (Federal Tax Crimes Blog 12/23/15), here.  Under the original NPA, Coutts paid $74.5 million (rounded) in penalties.  DOJ Tax announced today here that Coutts has entered an addendum to the NPA after disclosing additional, previously undisclosed, accounts and agreeing to pay an additional $27.9 million, for a combined penalty amount of $102.4 million (rounded).

The key excerpts are (emphasis supplied):

The Department of Justice announced today that it has signed an Addendum to a non-prosecution agreement with Coutts & Co Ltd. (Coutts), a private Swiss bank headquartered in Zurich.  The original non-prosecution agreement was signed on Dec. 23, 2015. At that time, Coutts reported that it held and managed 1,337 U.S. related accounts, with assets under management exceeding $2 billion, and paid a penalty of $78,484,000. In reaching today’s agreement, Coutts acknowledges that it should have disclosed additional U.S.-related accounts to the Department at the time of the signing of the non-prosecution agreement. 

“This agreement reflects our commitment to ensuring that foreign banks that participated in the Swiss Bank Program fully comply with their obligations to disclose accounts in which U.S. taxpayers have direct or indirect interests,” said Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Justice Department’s Tax Division. “When any person or entity makes false, incomplete, or misleading disclosures to the Department, the Department will hold those persons or entities accountable.” 

The Swiss Bank Program, which was announced on Aug. 29, 2013, provided a path for Swiss banks to resolve potential criminal liabilities in the United States relating to offshore banking services provided to United States taxpayers. Swiss banks eligible to enter the program were required to advise the Department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. As participants in the program, they were required to make a complete disclosure of their cross-border activities, provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers had a direct or indirect interest, cooperate in treaty requests for account information, and provide detailed information about the transfer of funds into and out of U.S.-related accounts, including undeclared accounts, that identifies the sending and receiving banks involved in the transactions. 

The Department executed non-prosecution agreements with 80 banks between March 2015 and January 2016. The Department imposed a total of more than $1.36 billion in Swiss Bank Program penalties.  Pursuant to today’s agreement, Coutts will pay an additional sum of $27,900,000 and will provide supplemental information regarding its U.S.-related account population, which now includes 311 additional accounts.  

Every bank that signed a non-prosecution agreement in the Swiss Bank Program had represented that it had disclosed all known U.S.-related accounts that were open at each bank between Aug. 1, 2008, and Dec. 31, 2014.  Each bank also represented that it would, during the term of the non-prosecution agreement, continue to disclose all material information relating to its U.S.-related accounts.  In reaching today’s agreement, Coutts acknowledges that there were additional U.S.-related accounts that it knew about, or should have known about, but that were not disclosed to the Department at the time of the signing of the non-prosecution agreement. Coutts has fully cooperated with the Department with respect to the additional U.S.-related accounts. 

DOJ Tax Announces Addendum with Category 2 Bank, Bank Lombard & Odier & Co. (7/31/18)

DOJ Tax announced here an Addendum to the nonprosecution agreement ("NPA") with Bank Lombard Odier & Co., Ltd., of Zurich Switzerland.  The bank previously obtained an NPA with an agreement to pay $99.809 million.  See Two More Banks Obtain NPAs under DOJ Swiss Bank Program (Federal Tax Crimes 12/31/15), here.  The Addendum requires the bank to pay an additional $5.3 million.

The key excerpt explaining the supplemental agreement is:

Every bank that signed a non-prosecution agreement in the Swiss Bank Program had represented that it had disclosed all of its U.S.-related accounts that were open at each bank between August 1, 2008, and December 31, 2014.  Each bank also represented that it would, during the term of the non-prosecution agreement, continue to disclose all material information relating to its U.S.-related accounts.  In reaching today’s agreement, Lombard Odier acknowledges that there were certain additional U.S.-related accounts that it knew about, or should have known about, but that were not disclosed to the Department at the time of the signing of the non-prosecution agreement.  Lombard Odier provided early self-disclosure of their unreported U.S.-related accounts and has fully cooperated with the Department.