Friday, December 4, 2015

Two Related Banks Obtain NPAs under DOJ Swiss Bank Program (12/4/15)

On December 3,, 2015, DOJ announced here that  EFG Bank European Financial Group SA, Geneva (EFG Group), and EFG Bank AG (EFG Bank) have jointly resolved their Category 2 submissions and entered NPAs under the DOJ program for Swiss banks, here.  The joint penalties are 29.988 million.

The relationships of the banks and their higher level entities are:
EFG Group is a holding company and Swiss bank based in Geneva, Switzerland, which is owned by European Financial Group EFG (Luxembourg) SA.  EFG Group is the direct and controlling shareholder of EFG International AG, which is a holding company.  EFG Bank, which is headquartered in Zurich, Switzerland, and has another Swiss office in Geneva, is the main Swiss private banking subsidiary of EFG International AG.  EFG Bank also has representative offices and branches in Asia and the Americas.  In 2003, EFG Bank acquired the Geneva-based bank Banque Édouard Constant (BEC).  While EFG Group and EFG Bank are participating jointly in the Swiss Bank Program, these two EFG banks are separate legal entities with distinct management and board control.
Some interesting excerpts (bold face by JAT):
One EFG Bank private banker had an established third-party client referral model for U.S. clients that involved two lawyers in the United States, one U.S. accountant and one Swiss fiduciary company.  At least one member of EFG’s senior management approved and supported this private banker’s relationship with one of the two U.S. lawyers.  This same U.S. lawyer asked the EFG private banker not to travel into the United States with a computer and requested that they communicate about U.S. taxpayer clients through faxes rather than email.  The EFG private banker responded, “[R]ight – next travel I travel will take no computer with me – I will then buy me one at BestBuy and leave it there for use when I am travelling. So I never will cary [sic] a computer over the border.” 
* * * * 
EFG also serviced certain U.S. clients with undeclared accounts held in the names of insurance companies and not the actual beneficial owner of the funds, known colloquially as an insurance wrapper.  Insurance wrappers were marketed by third-party providers in the wake of the UBS investigation as a means of disguising the beneficial ownership of U.S. clients.  These particular accounts were all held in the name of insurance providers.  By the operation of Swiss bank secrecy laws, the U.S. client’s ownership would not be disclosed to U.S. authorities, including the IRS.  
* * * * 
With respect to assets transferred to accounts in countries other than the United States and Switzerland upon account closure, significant amounts were transferred to numerous other jurisdictions.  For example, the following amounts were transferred in connection with the closure of U.S.-related accounts:
  • At least $12,680,000 was transferred to Bermuda;
  • At least $12,460,000 was transferred to Guernsey;
  • At least $25,200,000 was transferred to Liechtenstein;
  • At least $12,260,000 was transferred to Monaco;
  • At least $25,000,000 was transferred to Luxembourg; and
  • At least $33,550,000 was transferred to Hong Kong.
In connection with the closure of U.S.-related accounts, significant amounts also were transferred to the Bahamas, the British Virgin Islands, the Cayman Islands, Cyprus, Israel, Panama, Singapore and the United Arab Emirates.
The banks 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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