According to a Department of Justice press release, BNP Paribas (Suisse) SA (BNPP), KBL (Switzerland) Ltd. (KBL Switzerland) and Bank CIC have agreed to terms with the Department of Justice and will become the newest entrants into the Swiss Bank Program. Their admission will pave a new avenue of information that will flow from the Swiss banks directly to the Department of Justice and the Internal Revenue Service (IRS).

The Swiss Bank Program was established in mid-2013 and provides a way for Swiss banks to come forward and agree to fully participate in the U.S. investigation of American taxpayers with secret overseas bank accounts. According to the Department of Justice, BNPP, KBL Switzerland, and Bank CIC have agreed to:

  • Make a complete disclosure of their cross-border activities;
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
  • Cooperate in treaty requests for account information;
  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

In exchange for complying with the requirements of the Swiss Bank Program, the Department of Justice has agreed to not levy criminal sanctions against the financial institutions. In addition to complying with the requirements above, the Swiss Bank Program participants also agree to demonstrate implementation of controls to stop misconduct involving undeclared U.S. accounts.

KNPP is headquartered in Geneva and according to the Department of Justice, held over 750 U.S. accounts. According to the press release, KNPP tried to convince the U.S. that it was making its best efforts to be complaint with regard to Foreign Bank Account Reporting laws in the United States. KNPP set us internal training sessions that instructed bankers and relationship managers to notify U.S. residents of the reporting obligations. Though, the Department of Justice alleges that the efforts were for show and that the bank knew or should have known that many of the U.S. accounts it managed were and continued to be out of compliance. BNPP will pay a penalty of nearly $60 million.

KBL Switzerland is a Geneva-based financial institution and significantly increased its amount of assets under management when it made an effort to acquire the business of account-holders who were displaced due to the UBS and Credit Suissee prosecutions. KBL Switzerland created and maintained accounts for its U.S. customers in the names of sham entities that were formed outside of the U.S. and Switzerland.

In its press release, the Department of Justice identified several instances where relationship managers at KBL Switzerland told U.S. clients that the account would not be reported to the United States even though compliance forms such as a W-9 were not provided to the Swiss bank.  KBL Switzerland will pay a penalty of nearly $19 million.

Bank CIC is a subsidiary of Crédit Mutuel-CIC, a large financial group located in France. According to the Department of Justice, Bank CIC’s staff did not solicit business from U.S. clients, but provided Swiss-style banking serves to them upon referral. Since 2008, Bank CIC had over 260 U.S.-related accounts and will pay a penalty of over $3.2 million.

The Swiss Bank Program typically involves Swiss financial institutions coming forward and providing incriminating information about their business as a whole, but typically not the individual employees that were responsible for much of the illegal activity. This is primarily because the non-prosecution agreement offered by the Department of Justice only protects the banking institution and not the individual employees that may have been involved. But in addition to the information that all participants of the Swiss Bank Program agree to provide, KBL Switzerland also agreed to provide:

  • The policies and lack of oversight that contributed to the misconduct committed by KBL Switzerland relationship managers and their supervisors;
  • Data on desks and employees with elevated concentrations of U.S.-related accounts;
  • Information on key external asset managers that had significant involvement with U.S.-related accounts;
  • The names and positions of compliance officers and senior managers; and
  • Written narratives on its largest and most problematic U.S.-related accounts.

This additional information may indicate that the Department of Justice may be looking to go after individual asset managers or other employees that were involved in the banking operations. The threat of prosecution against Swiss banking employees could be extremely detrimental for U.S. residents who have or have had accounts in a secret overseas bank account.

In addition to the information flowing through to the Department of Justice and the IRS from the standard terms of the Swiss Bank Program and the agreements under the Foreign Account Tax Compliance Act (FATCA), asset managers could attempt to abrogate their criminal liability (or at least a lengthy prison sentence) by providing incriminating information about their clients to U.S. investigators. IT is very common for those who have knowledge of a vast number of persons of interest to trade in their information (and testimony) for a reduced punishment.

If you have or have had a foreign bank account with an account balance of $10,000 or more that has not been disclosed to the IRS, you are at risk. Information is flowing into the United States at an unprecedented speed and it is only a matter of time until incriminating information about your account winds up on the desk of an IRS investigator. The time to take action is now.

The IRS has established the Offshore Voluntary Disclosure Program (OVDP), a program that allows taxpayers to come forward with information of their foreign and previously undeclared foreign account, pay appropriate back taxes, interest, and penalties. In exchange, the government will provide the taxpayer with an agreement to not engage in a criminal prosecution against them. But the OVDP has a major catch: if the IRS has already begun investigating a taxpayer for any tax-related issue, the OVDP may no longer be available. Simply said: time is of the essence. If you have an undeclared foreign bank account, it is in your best interest to contact an experienced tax attorney immediately.

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in representing taxpayers that are considering participating in the OVDP. Only a tax attorney can help you weigh the legal aspects of the OVDP and whether the program is right for you. Ignoring the fact that you have or have had an undeclared foreign bank account will not make it go away. Allow our team to zealously advocate for your physical and financial freedom. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.