Ersparniskasse Schaffhausen AG Signs Non-Prosecution Agreement with DOJ

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On June 26, 2015, the US Department of Justice announced that Ersparniskasse Schaffhausen AG (Ersparniskasse Schaffhausen) signed a Non-Prosecution Agreement under the department’s Swiss Bank Program.

Ersparniskasse Schaffhausen Background

Ersparniskasse Schaffhausen was founded in 1817 and is wholly owned by a Swiss charitable foundation. It is headquartered in the city and canton of Schaffhausen, Switzerland. Ersparniskasse Schaffhausen opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the Internal Revenue Service (IRS) or the U.S. Department of the Treasury as required by U.S. law.

From 2004 through 2011, Ersparniskasse Schaffhausen accepted referrals of U.S. persons as new clients from an external asset manager who, until 2009, resided in the United States and conducted some of his business through a corporation organized under the laws of the United States. The majority of the accounts that came to Ersparniskasse Schaffhausen as a result of these referrals were held in the names of non-U.S. entities that were beneficially owned by U.S. persons.

In May 2008, with the knowledge and approval of Ersparniskasse Schaffhausen management, the external asset manager and an Ersparniskasse Schaffhausen relationship manager visited five U.S. cities to meet with U.S. clients and attorneys who had the potential to refer new clients. Topics discussed during their meetings included the “crisis” involving Swiss bank UBS AG, client satisfaction with Ersparniskasse Schaffhausen, the performance of client accounts at Ersparniskasse Schaffhausen and the “asset protection” benefits of Ersparniskasse Schaffhausen.

Until 2009, Ersparniskasse Schaffhausen opened numbered accounts for U.S. persons, including code-name or pseudonym accounts, upon request. Upon opening this type of account, an Ersparniskasse Schaffhausen employee would enter the accountholder’s name in a physical register rather than in the bank’s electronic records system. This action limited the number of Ersparniskasse Schaffhausen personnel who knew the client’s identity. Holders of these accounts could also provide documents to Ersparniskasse Schaffhausen using only their code names or numbers as their authorized signatures.

Ersparniskasse Schaffhausen provided all of its clients, including U.S. persons, with the option to request that Ersparniskasse Schaffhausen retain all mail related to a client’s financial accounts in exchange for a standard service fee. Ersparniskasse Schaffhausen understood that providing such hold-mail agreements upon request could allow U.S. persons to keep evidence of their Ersparniskasse Schaffhausen accounts outside of the United States and thus assist them in concealing assets and income from the IRS.

Ersparniskasse Schaffhausen also accepted IRS Forms W-8BEN for U.S.-related accounts held in the names of non-U.S. entities, such as foreign corporations, trusts or foundations. Because Swiss law required Ersparniskasse Schaffhausen to identify the true beneficial owners of the entities on a document called a Form A, Ersparniskasse Schaffhausen knew that these accounts were beneficially owned by U.S. persons. Nonetheless, Ersparniskasse Schaffhausen accepted Forms W-8BEN that it knew falsely stated that the entities were the beneficial owners of the accounts.

Ersparniskasse Schaffhausen was aware of the 2009 IRS Offshore Voluntary Disclosure Program for U.S. persons. Despite knowing of that program and knowing or having reason to know that some of its U.S. clients had likely not declared their Ersparniskasse Schaffhausen accounts to the IRS, Ersparniskasse Schaffhausen made no effort to encourage its U.S. clients to disclose their accounts through that program.

During 2009, consultants reported to Ersparniskasse Schaffhausen, among other things, that Ersparniskasse Schaffhausen had increased risks because of its relationship with the external asset manager; that it was only a matter of time until small banks came into contact with U.S. authorities; and that there was a latent risk that previous revenues from Ersparniskasse Schaffhausen’s “U.S. strategy” could be seized or corresponding fines imposed. According to minutes of a 2009 meeting of the Ersparniskasse Schaffhausen board of directors, an Ersparniskasse Schaffhausen executive stated, among other things, that “there is practically no risk if U.S. customers travel to Switzerland and a customer account is handled locally,” and that he had been informed that Swiss bank Wegelin & Co. was going to keep its previous U.S. customers.

In October 2009, the Ersparniskasse Schaffhausen board of directors voted to continue the account relationships with clients of the external asset manager, including his U.S. clients, under certain conditions, including that his business be relocated to Switzerland. The board also voted to “have the option of entering into new cross-border business relationships.”

Swiss Bank Program Penalty and Ersparniskasse Schaffhausen’s Non-Prosecution Agreement

According to the terms of the non-prosecution agreement signed on June 26, 2015, Ersparniskasse Schaffhausen agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Ersparniskasse Schaffhausen for tax-related criminal offenses.

Since August 1, 2008, Ersparniskasse Schaffhausen provided private banking services for 90 U.S.-related accounts with approximately $65 million in assets. Thirty-seven of these accounts were opened after Aug. 1, 2008. Ersparniskasse Schaffhausen will pay a penalty of $2.066 million.

In accordance with the terms of the Swiss Bank Program, Ersparniskasse Schaffhausen mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.

Bank Sparhafen Zurich AG Reaches Resolution with DOJ

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On June 19, 2015, the Department of Justice announced that Bank Sparhafen Zurich AG (Bank Sparhafen) has reached resolution under the department’s Swiss Bank Program.

Bank Sparhafen Background Information

Bank Sparhafen was founded in 1850 and has its sole office in Zurich. Bank Sparhafen knew that U.S. persons had a duty under U.S. law to report their income to the Internal Revenue Service (IRS) and to pay taxes on that income, including all income earned in accounts that Bank Sparhafen maintained in Switzerland. Despite this knowledge, Bank Sparhafen opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Treasury, as required by U.S. law.

After August 1, 2008, U.S. persons opened 32 U.S.-related accounts at Bank Sparhafen, and only one of them provided a Form W-9 to Bank Sparhafen upon opening an account. In most cases, the U.S. persons who opened accounts at Bank Sparhafen during this period had been required to close their accounts at other Swiss banks, and Bank Sparhafen knew or had reason to know that most of these accounts were likely not declared to the IRS. Moreover, 22 of the U.S.-related accounts opened during this period were funded by transfers from banks that were or are the targets of Justice Department criminal investigation.

Two relationship managers at Bank Sparhafen were responsible for managing most of its U.S.-related accounts in the period since August 1, 2008, and one of those managers directly reported to Bank Sparhafen’s chief executive officer. Bank Sparhafen relationship managers assisted U.S. persons in executing waiver forms that directed the bank not to acquire U.S. securities in their accounts. Bank Sparhafen knew that the purpose and effect of these forms was to avoid disclosing the identities of the U.S. persons to the IRS.

Until 2012, Bank Sparhafen provided its U.S. clients with an option for hold-mail agreements, even though it understood that providing these agreements upon request could allow U.S. persons to keep evidence of their accounts outside of the United States in order to conceal assets and income from the IRS. One U.S. client told his Bank Sparhafen relationship manager by email that the hold-mail fee was “cheap insurance against having my dealings with you come to the attention of the government revenue authorities.”

Bank Sparhafen also offered travel cash cards to its clients, including U.S. persons. A client could instruct Bank Sparhafen to load up to 10,000 Swiss francs, U.S. dollars or euros from his or her Bank Sparhafen bank account onto a travel cash card. The client could then use the card for purchases or remit unused balances back to the Bank Sparhafen account. U.S. persons’ use of these cards facilitated access to or use of undeclared funds on deposit at Bank Sparhafen. One Bank Sparhafen relationship manager sent a brochure about travel cash cards to a U.S. client who did not wish to transfer money to the United States because of “surveillance” concerns.

Bank Sparhafen’s Participation in the Swiss Program for Banks and DOJ Non-Prosecution Agreement

In accordance with the terms of the Swiss Bank Program, Bank Sparhafen described in detail the structure, operation and supervision of its U.S. cross-border business, including the names of relevant individuals and entities. It also encouraged existing and prior holders of U.S.-related accounts to disclose their accounts to the IRS through the Offshore Voluntary Disclosure Program.

According to the terms of the non-prosecution agreements signed on June 19, 2015, Bank Sparhafen agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Since August 1, 2008, Bank Sparhafen held 91 U.S.-related accounts, with over $25 million in assets. Bank Sparhafen will pay a penalty of $1.81 million. In accordance with the terms of the Swiss Bank Program, Bank Sparhafen mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.

Consequences for US Taxpayers with Undisclosed Accounts at Bank Sparhafen

On August 4, 2014, the IRS increased the OVDP penalty to 50 percent from 27.5 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. This means that, starting June 19, 2015, noncompliant Bank Sparhafen’s U.S. accountholders are likely to now pay a 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

DOJ Non-Prosecution Agreement with Bank Linth LLB AG

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On June 19, 2015, the Department of Justice announced that Bank Linth LLB AG (Bank Linth) signed a Non-Prosecution agreement pursuant to the DOJ’s Swiss Bank Program.

Bank Linth Background

Bank Linth, one of the largest regional banks in Eastern Switzerland, was founded in 1848. It is headquartered in Uznach, Switzerland, which is approximately 35 miles southeast of Zurich. Bank Linth provided private banking and asset management services to U.S. taxpayers through private bankers based in Switzerland. It opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations.

Bank Linth’s cross-border banking business aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts. Bank Linth provided this assistance to U.S. clients in a variety of ways, including the following:

Opening and maintaining accounts in the names of sham entities;

Providing U.S. taxpayers with numbered accounts that hid the taxpayers’ identities;

Facilitating U.S. taxpayers’ withdrawal of cash from undeclared accounts; and

Agreeing to hold bank statements and other mail relating to accounts rather than sending them to U.S. taxpayers in the United States.

On several occasions, Bank Linth opened accounts for U.S. taxpayers through an external asset manager, and one of these accounts was opened in the name of a sham foundation. In that instance, Bank Linth knowingly accepted and included in account records forms provided by the directors of the sham foundation that falsely represented the ownership of the assets in the account for U.S. federal income tax purposes.

Participation in the Swiss Bank Program and the Non-Prosecution Agreement

In accordance with the terms of the Swiss Bank Program, Bank Linth described in detail the structure of its banking business, including its management and supervisory structure, and provided the names of management and legal and compliance officials. Bank Linth further provided detailed and specific information related to its illegal U.S. cross-border business, including the bank’s misconduct, policies that contributed to that misconduct and the names of the relationship managers overseeing the bank’s U.S.-related business. Bank Linth also obtained affidavits from bank employees regarding the bank’s conduct and related matters.

According to the terms of the non-prosecution agreements signed today, Bank Linth agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Bank Linth for tax-related criminal offenses.

Since August 1, 2008, Bank Linth held 126 U.S.-related accounts, with over $102 million in assets. Bank Linth will pay a penalty of $4.15 million (this is a post-mitigation penalty).

Consequences for US Taxpayers with Undisclosed Bank Linth Accounts

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 August 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. This means that, starting June 19, 2015, noncompliant Bank Linth U.S. accountholders will now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Berner Kantonalbank Non-Prosecution Agreement

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On June 9, 2015, the Department of Justice announced that Berner Kantonalbank AG (Berner Kantonalbank), signed a Non-Prosecution Agreement with the DOJ pursuant to the department’s Swiss Bank Program.

Swiss Bank Program Background

The Swiss Bank Program, which was announced on August 29, 2013, provided a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Swiss banks which meet the requirements of the Program are eligible for a non-prosecution agreement.

Berner Kantonalbank Background

Berner Kantonalbank was founded in 1834 as Kantonalbank von Bern, the first Swiss cantonal bank. Berner Kantonalbank is based in the Canton of Bern and presently has 73 branches in Switzerland. Berner Kantonalbank knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at Berner Kantonalbank were not complying with their U.S. reporting obligations. Berner Kantonalbank opened, serviced and profited from accounts for U.S. clients who were not complying with their income tax obligations.

Berner Kantonalbank provided services that facilitated some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets in those accounts and related income. These services included opening and maintaining numbered accounts, allowing clients to use code names rather than full account numbers and providing hold mail services. Berner Kantonalbank opened accounts for account holders who exited other Swiss banks and accepted deposits of funds from those banks. Berner Kantonalbank also processed standing orders from U.S. persons to transfer amounts under $10,000 from their U.S.-related accounts. In one instance, a relationship manager asked an accountholder, who was a dual Swiss-U.S. citizen living in the United States, about the Foreign Account Tax Compliance Act (FATCA) and voluntary disclosure. When the accountholder failed to execute FATCA-related documents, Berner Kantonalbank took steps to close the account. In connection with that closing, the accountholder withdrew $70,000 and approximately 500,000 Swiss francs in cash.

Berner Kantonalbank: Participation in the DOJ Program for Swiss Banks

Berner Kantonalbank committed to full cooperation with the U.S. government throughout its participation in the Swiss Bank Program. As part of its cooperation, Berner Kantonalbank provided a list of the names and functions of 16 individuals who structured, operated or supervised its cross-border business. These individuals served as the chairman of the board of directors, members of the executive board, regional managers, heads of departments or heads of divisions. Berner Kantonalbank additionally provided information concerning its relationship managers and external asset managers, and it described in detail the structure of its cross-border business with U.S. persons, including narrative descriptions of high-value U.S.-related accounts and U.S.-related accounts held by entities.

Berner Kantonalbank Non-Prosecution Agreement

According to the terms of the non-prosecution agreement, Berner Kantonalbank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Since August 1, 2008, Berner Kantonalbank held approximately 720 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $176.5 million. Berner Kantonalbank will pay a penalty of $4.619 million.

In accordance with the terms of the Swiss Bank Program, Berner Kantonalbank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.

Consequences for US Taxpayers With Bank Accounts At Berner Kantonalbank

While U.S. accountholders at Berner Kantonalbank 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 August 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. This means that the noncompliant U.S. accountholders at Berner Kantonalbank must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Contact Sherayzen Law Office for Professional Help With Undisclosed Foreign Accounts

If you have undisclosed foreign accounts at Berner Kantonalbank or any other bank outside of the United States, please contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Our professional experienced legal team has helped hundreds of US taxpayers worldwide to bring their US tax affairs in order. We can help you!

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Société Générale Private Banking Non-Prosecution Agreement

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On June 9, 2015, the Department of Justice announced that Société Générale Private Banking (Suisse) SA has reached a resolution under the DOJ’s Swiss Bank Program.

According to the terms of the non-prosecution agreement, Société Générale Private Banking agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

Société Générale Private Banking has had a presence in Switzerland since 1926, and had a U.S.-licensed representative office in Miami from the early 1990s until it closed on August 26, 2013. Société Générale Private Banking opened and maintained accounts for accountholders who had U.S. tax reporting obligations, and was aware that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on all of their income, including income earned in Société Générale Private Banking accounts. Société Générale Private Banking knew that it was likely that certain U.S. taxpayers who maintained accounts at the bank were not complying with their U.S. income tax obligations.

Société Générale Private Banking’s U.S. cross-border banking business aided and assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the IRS. SGBP-Suisse used a variety of means to assist U.S. clients in hiding their assets and income, including opening and maintaining accounts for U.S. taxpayers in the name of non-U.S. entities, including sham entities, thereby assisting such U.S. taxpayers in concealing their beneficial ownership of the accounts. Such entities included Panama and British Virgin Island corporations, as well as Liechtenstein foundations. In two instances, an Société Générale Private Banking employee acted as a director of entities that had U.S. taxpayers as beneficial owners. In another instance, upon the death of the beneficial owner of an entity, the heirs opened accounts held by sham entities at Société Générale Private Banking to receive their shares of the assets from the entity account.

Société Générale Private Banking further provided numbered accounts, allowing the accountholder to replace his or her identity with a code name or number on documents sent to the client, and held statements and other mail at its offices in Switzerland, rather than sending them to the U.S. taxpayers in the United States. In addition to these services, Société Générale Private Banking:

Processed requests from U.S. taxpayers for cash or gold withdrawals so as not to trigger any transaction reporting requirements;

Processed requests from U.S. taxpayers to transfer funds from U.S.-related accounts at Société Générale Private Banking to accounts at subsidiaries in Lugano, Switzerland, and the Bahamas;

Opened accounts for U.S. taxpayers who had left UBS when the department was investigating that bank;

Processed requests from U.S. taxpayers to transfer assets from accounts being closed to other Société Générale Private Banking accounts held by non-U.S. relatives and/or friends; and

Followed instructions from U.S. beneficial owners to transfer assets to corprate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus.

Throughout its participation in the Swiss Bank Program, Société Générale Private Banking committed to full cooperation with the U.S. government. For example, Société Générale Private Banking described in detail the structure of its U.S. cross-border business, including providing a list of the names and functions of individuals who structured, operated or supervised the cross-border business at Société Générale Private Banking; a summary of U.S.-related accounts by assets under management; written narrative summaries of 98 U.S.-related accounts; and the circumstances surrounding the closure of relevant accounts holding cash or gold. Société Générale Private Banking also provided information to make treaty requests to the Swiss competent authority for U.S. client account records.

Since August 1, 2008, Société Générale Private Banking held and managed approximately 375 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $660 million. Société Générale Private Banking will pay a penalty of $17.807 million.

US taxpayers who have not yet disclosed their Société Générale Private Banking accounts, but who wish to participate in the 2014 OVDP, are likely to face now a 50% OVDP penalty rate.