Update Article on Swiss Category 2 Banks Efforts to Comply and Mitigate Penalties (8/15/14)

Giles Broom and Carolyn Bandel, Swiss Banks Send U.S. Client Data Before Cascade of Settlements (Bloomberg 8/4/14), here.  Excerpts:

Swiss banks will on the whole meet the deadline for delivering information on offshore accounts to the U.S., improving their chances of settling the cases this year. 

Roiled by the demise of the country’s oldest bank, the lenders are helping the Justice Department build cases against Americans who failed to report money stashed in Switzerland, a $2.3 trillion global hub for cross-border banking. 

As many as 106 banks have entered the department’s program to deliver documents showing how they helped clients hide money from the Internal Revenue Service. Bloomberg News contacted 34 of the lenders, 20 of whom said they will meet today’s deadline. Five others declined to comment, and seven didn’t have clear-cut answers. Two banks said they have dropped out of the program. 

The results indicate that banks with few exceptions will comply with the program’s exacting terms. This would put them in position to pay fines and avoid the fate of Wegelin & Co., a more than 270-year-old bank forced out of business by a U.S. tax probe that led to a guilty plea in 2013. 

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Swiss law forbids the transfer of client names to foreign governments, unless requests for information conform to criteria set out in tax treaties. But banks can send other information to complement what the U.S. government gleaned from over 43,000 voluntary disclosures by American taxpayers. 

Category 2 banks must disclose the total number of U.S. accounts since 2008, their highest dollar value, and the employees who managed them, in documents verified by an independent examiner, according to a joint Swiss-U.S. government statement announcing the program last August. 

Account Disclosure 

June 30 was the deadline for turning over information on Americans considered in breach of U.S. tax rules. Today marks the end of the second wave of deliveries and includes documents that show which American clients were compliant. 

Some banks will try to mitigate penalties by providing documents to the Justice Department by Sept. 15 to support their claims that they encouraged clients to disclose accounts to the IRS through its offshore voluntary disclosure program.