Switzerland Reportedly Strikes Deal with U.S. for the "Other" Banks; Implications for U.S. Depositors (8/28/13)

A deal is reported.  See Martin de Sa'Pinto, Swiss government ready to sign tax deal with United States (Reuters 8/28/13), here.

The report is sketchy, but here are some interesting parts

A Swiss newspaper reported the host of banks not yet under formal investigation in the U.S. could face fines of as much as 50 percent of their American client assets. Government spokesman Andre Simonazzi said the terms and conditions of the program would not be immediately released, but would be communicated "as soon as possible" 

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The agreement deals mainly with a settlement for the roughly 100 Swiss banks that had U.S. clients, but are not yet being investigated by U.S. justice authorities. 

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Around a dozen banks are under U.S. investigation, including Credit Suisse (CSGN.VX), Julius Baer (BAER.VX), the Swiss arm of Britain's HSBC (HSBA.L), privately held Pictet and state-backed regional banks Zuercher Kantonalbank and Basler Kantonalbank (BSKP.S).

Several of those banks have said they are preparing information of client withdrawals demanded by U.S. investigators, after the Swiss government said it would allow them to circumvent secrecy and privacy laws to do so.

Here is another report.  Details surface of US Justice, Swiss banks deal (update) (genevalunch.com 8/28/13), here.

Category 1 – banks already involved in a criminal investigation and therefore unable to benefit from the agreement. 

Category 2 – banks which presumably violated US law and will be required to pay a fine related to any accounts with a balance of CHF50,000 or more at any point from 1 August 2008 on, with the amount of the fine ranging from 20 percent of the balance for accounts before 1 August 2009 to 50 percent for accounts opened after 28 February 2009. The percentage applies to the largest balance held during the period in question. The agreement nevertheless takes into account clearly detailed efforts by the bank to get the client to declare the assets to the IRS tax authorities. 

Categories 3 and 4 won’t be asked to pay fines. The third group is banks that can prove they did not violate US law and the fourth group is local Swiss banks.

JAT Comment (Really Off the Cuff):  Those Category 2 banks who sucked up deposits from the banks in DOJ's cross-hairs in 2009 (principally, of course, UBS) thought they had struck gold but, as it turns out, it was fool's golds. It is not clear whether they will have to deliver up names, information and documents for U.S. clients, but I suspect there will be some of that.

Addendum 8/29/.7:45 am

David Jolly and Lynnley Browning, U.S. and Switzerland Are Close to Deal on Penalizing Banks in Tax Case (NYY DealBook 8/29/13), here.  Excerpts (emphasis supplied).

In a conference call with journalists on Wednesday, a senior Justice Department official, who spoke on the condition of anonymity, said banks that had helped Americans evade taxes would be required to admit wrongdoing and pay penalties in exchange for deferred prosecution agreements, in addition to handing over information on account holders. 

The final agreement will include penalty provisions “starting at 20 percent of the value of accounts starting in 2008,” she said. The penalties would increase for accounts opened after the Swiss bank UBS reached a deferred prosecution agreement in 2009, she [spokesperson for the Swiss Federal Tax Department] added.\ 

Another person briefed on the matter said the penalties could rise to as much as 50 percent of the value of the banks’ undeclared American accounts.\ 

The total penalties, the Justice Department official added, would probably be “in the hundreds of millions, exceeding a billion dollars.” 

The official said that 14 Swiss banks under investigation by the United States would not be eligible to participate in the new deal but that they would benefit by having a framework for turning over information. The official declined to identify the banks.

Addendum 8/29 8:05am:

Amy S. Elliott, Swiss Government to Finalize Agreement with U.S. Enabling Bank Cooperation, 2013 TNT 168-2 (8/29/13).  Key Points attributed to a DOJ official (Emphasis supplied):

1. Swiss banks other than the 14 currently under investigation can come forward to obtain either a deferred prosecution agreement or a non-prosecution agreement.
2. Those banks may provide information to establish their nonculpability and, if successful, may obtain a "non-target letter, an option that will also be made available for small, local banks deemed compliant under the Foreign Account Tax Compliance Act." 
3. The estimate is that penalties under the structure would involve "hundreds of millions or exceeding a billion dollars."
4. The rough outline of the penalty structure is: (i) "a penalty that would start at 20 percent;" (ii) "increase to 30 percent for accounts that were opened after February 18, 2009;" and (iii) "increase to 50 percent for accounts that were opened after the June 17, 2010, ratification by the Swiss parliament of the 2009 protocol to the Switzerland-U.S. tax treaty."
5. Banks must disclose (i) their activities, including "third-party advisers or professionals." and (ii) "'information on an account-by-account basis," including the account dollar values, the extent to which the account was related to a U.S. individual, either directly or indirectly, and detailed information on transfers both into and out of the accounts."
6. Generally culpable banks complying with these requirements would get a nonprosecution agreement.  The more culpable ones may get a deferred prosecution agreement. 
7. The banks are expected to cooperate in treaty requests.  The fruits of those requests are expected to have "immediate law enforcement benefits," with more law enforcement benefits when the U.S. ratifies the 2009 protocol.  
8. U.S. persons with Swiss bank accounts are not covered by the agreement and therefore take their own risks.  The DOJ official cautioned:  "They are close to out of time."