Friday, October 16, 2015

One More Bank Obtains NPA under DOJ Swiss Bank Program (10/16/15)

On October 8, 2015, DOJ announced here that BBVA Suiza S.A. has entered an NPA under the DOJ program for Swiss banks, here.  The penalties are:

BBVA Suiza S.A.
$10.390 million

Here are key excerpts.
BBVA Suiza is a Swiss private bank with one office in Zurich, where it provided private banking and asset management services through private bankers.  BBVA Suiza is wholly owned by Banco Bilbao Vizcaya Argentaria S.A. and is part of the BBVA Group. BBVA, the flagship of the BBVA Group, is a major global financial institution based in Spain.  In 1984, a predecessor of BBVA entered the Swiss market by purchasing a Swiss bank that later became BBVA Suiza.
BBVA Suiza was aware that U.S. taxpayers had a legal duty to report their assets and income to the Internal Revenue Service (IRS) and to pay taxes on the basis of all their income, including income earned from accounts that BBVA Suiza maintained on their behalf.  Despite being aware of this legal duty, BBVA Suiza maintained undeclared accounts for clients that it knew, or should have known, were U.S. taxpayers. 
BBVA Suiza offered a variety of traditional Swiss banking services that assisted and enabled certain of its U.S. taxpayer clients to conceal their account assets and income, file false federal tax returns with the IRS and evade their U.S. tax obligations.  These services included opening and maintaining undeclared accounts for U.S. taxpayers, offering the option to hold mail at BBVA Suiza and providing Swiss travel-cash cards, which enabled one U.S. client to access funds from undeclared accounts to spend in the United States. 
BBVA Suiza permitted four groups of U.S. taxpayers to maintain six accounts, which held U.S. securities in the name of six offshore structures, specifically Panama corporations and British Virgin Islands companies.  The U.S. taxpayer’s interest in each of these accounts was not reported to the IRS even though BBVA Suiza knew, or had reason to know, that such offshore-structure accounts were operated without strict adherence to corporate formalities and, in effect, were operated by the U.S. taxpayer beneficial owners as sham, conduit or nominee entities.  BBVA Suiza relationship managers associated with these six accounts: 
  • met with or took instructions from the U.S. taxpayer beneficial owners of these offshore-structure accounts, instead of the directors or other authorized parties of the account;
  • acted on instructions to transfer funds to a U.S. beneficial owner, including to accounts located within the United States or to a third-party designated by the U.S. beneficial owner; and/or
  • effected transfers from certain of the offshore-structure accounts to pay for personal expenses incurred in connection with the use of credit cards issued in favor of the U.S. beneficial owners of the structures. 
BBVA Suiza accepted certifications from the directors of these entities that falsely declared that the entity was the beneficial owner of the assets deposited in the accounts.  In these instances, BBVA Suiza was in violation of the terms of its Qualified Intermediary Agreement with the IRS by failing to obtain IRS Forms W-9 from the U.S. beneficial owners of accounts that held U.S. securities, undertake IRS Form 1099 reporting or impose backup tax withholding when it had knew, or had reason to know, that an offshore structure was acting as a nominee for its U.S. beneficial owners. 
BBVA Suiza also transferred the assets of U.S.-related accounts belonging to certain U.S. taxpayer clients in ways that concealed the U.S. nature of those accounts, such as through cash or check withdrawals, wire transfers and sham transfers to non-U.S. relatives or their nominal accountholders.  In addition, BBVA Suiza removed some of its U.S. taxpayer clients’ names as joint-accountholders, leaving only non-U.S. persons as accountholders, or moved their assets into new accounts that were held in the names of non-U.S. persons, including non-U.S. relatives.  BBVA Suiza thereafter treated such accounts as non-U.S.-related accounts, despite some relationship managers continuing to take and execute instructions given directly from the U.S. taxpayers formerly associated with the accounts, or the U.S. taxpayer clients retaining effective beneficial ownership of the accounts.  BBVA Suiza followed instructions from U.S. beneficial owners, or their external asset managers, to transfer undeclared assets from U.S.-related accounts to locations throughout the world without knowing or first confirming whether the U.S. beneficial owners were compliant with their U.S. tax obligations. 
Since Aug. 1, 2008, BBVA Suiza maintained 138 U.S.-related accounts with a maximum aggregate dollar value of more than $157 million.  BBVA Suiza will pay a penalty of $10.390 million. 
While U.S. accountholders at BBVA Suiza 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 BBVA Suiza must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.
 The bank 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).

Here are the updated statistics for the Swiss Bank Program:

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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