More Banks Agree to Non-Prosecution Agreements for Offshore Activities

For generations Swiss banking laws provided a level of privacy and secrecy for all account holders regardless of their country of residence. During this time many foreign nations, including Americans, came to bank and do business in Switzerland due to the countries favorable laws that respected the privacy of account holders. However, faced with increasingly pressing budget shortfalls and a perception that wealthy Americans were avoiding paying their fair share in taxes through the use of offshore accounts and trusts the U.S. government began to take steps to identify taxpayers who fail to pay taxes on foreign income and accounts.

In August of 2013, the Department of Justice announced its Swiss Bank Program. The program is intended to allow Swiss Banks that may have committed criminal acts regarding the administration and collection of U.S. tax obligations to resolve these potential liabilities. Banks that participate in the program can receive favorable treatment including a non prosecution agreement. However foreign financial institutions must agree to certain conditions to participate. These conditions include:

  • A full and complete disclosure of all offshore or cross-border banking activities involving U.S. accounts.
  • A detailed accounting of accounts where a U.S. taxpayer holds an interest or signature authority.
  • Payment of penalties.
  • Agreement to cooperate in all future tax information sharing treaty requests and obligations.
  • Provide information about other foreign financial institutions that transferred funds into secret accounts or received funds from secret accounts.
  • The financial institution agrees to close the accounts of individuals who refuse to come into compliance with FATCA and other U.S. tax disclosure obligations.

Financial institutions providing a wealth of information to the U.S. government means that taxpayers with undeclared accounts are more likely than ever to be identified and to face serious tax consequences.

Migros Bank Agrees to Non Prosecution Agreement with DOJ

Throughout most of the 2000s Migros bank accepted referrals for new U.S.-based clients. During this time the bank provided standard Swiss banking services to all clients including American clients.  In the late 2000s, the bank formed a working group to assess its risk and exposure to U.S. banking laws. The working group assessed the risk faced by the bank as being relatively low and recommended the creation of a U.S. banking bureau. In May 2009, procedures were put into place including prohibiting U.S. clients from using the e-banking system, prohibiting bank employees from sending letters and other correspondence to the U.S., and other measures to conceal the existence of these U.S. based accounts. For these and other acts, Migros Bank has agreed to pay $15.037 million in fines as part of a deferred prosecution agreement.

Graubündner Enters Into Non-Prosecution Agreement For Swiss Banking Services Provided to Americans

Graubündner also provided traditional Swiss banking services to all of its clients during much of the 2000s which included the use of secret accounts, account aliases, and code words. Furthermore, bank clients had the option of telling the bank to refrain from disclosing the existence of the offshore account to the IRS. The bank also enabled U.S. persons to trade in securities without reporting account earnings or supplying the IRS with other required information. For its offshore and crossborder banking activities Graubündner agreed to pay a fine of just over $3 million. The bank will also comply with all other aspects of the Swiss Bank Program listed above.

BHF-Bank Reaches Resolution Under Swiss Bank Program

BHF,  a wholly-owned Swiss subsidiary of BHF-BANK Aktiengesellschaft, had permitted Americans and U.S. taxpayers to conceal assets and accounts from the U.S. government through a variety of means. The bank, through a subsidy known as Plinius Management Limited, would arrange for third-party facilitators to structure client’s accounts and assets in such a fashion as to avoid detection of the U.S. based beneficial owner. In at least one instance the bank may have disregarded certain obligations and requirements related to the purchase and sale of U.S. based securities. As part of the terms for entry into the Swiss Bank Program the bank agreed to pay a fine of $1.768 million.

Offshore Voluntary Disclosure Can Correct Past Offshore Mistakes

Entering into a program like Offshore Voluntary Disclosure (OVDP) can allow a taxpayer to come back into compliance with the U.S. Tax Code while facing significantly reduced consequences. However, if you have banked with one of the above banks or another foreign financial institution that has been added to the IRS’ facilitator’s list, you will be subject to an increased offshore penalty. However, if your bank is cooperating with the government, there is a near certainty that your undisclosed accounts will soon be discovered and you will face even more severe consequences.

The experienced tax attorneys of the Tax Law Offices of David W. Klasing can provide trusted guidance and advice regarding your noncompliance with FBAR, FATCA, and other offshore tax obligations. To schedule a private, reduced-rate offshore tax consultation call 800-681-1295 today or contact us online.