Banque Pictet Deferred Prosecution Agreement | Offshore Voluntary Disclosure Lawyer
On December 4, 2023, Banque Pictet et Cie SA (“Banque Pictet” – a Swiss private bank) entered into a deferred prosecution agreement with the US government. In this article, I will discuss Banque Pictet Deferred Prosecution Agreement and explain its importance.
Banque Pictet Deferred Prosecution Agreement: Facts Leading Up to the Agreement
The Pictet Group was founded in 1805; it is a privately held Swiss financial institution headquartered in Geneva. It has historically operated as a general partnership and, since 2014, as a corporate partnership. A limited number of managing partners, generally eight or fewer, collectively known as “The Salon,” own and manage the Pictet Group.
As of December 31, 2014, the Pictet Group had approximately 3,800 employees in various locations, primarily in Switzerland, but also in Luxembourg, Hong Kong, Singapore and the Bahamas. The Pictet Group operates two main business divisions: institutional asset management and private banking for individuals. From 2008 to 2014, Pictet Group’s private banking division was operated by the group’s following banking entities: the Swiss bank (Banque Pictet & Cie SA); Pictet & Cie (Europe) SA, headquartered in Luxembourg; Bank Pictet & Cie (Asia) Ltd. in Singapore and the Bahamian bank, Pictet Bank & Trust Ltd.
The Pictet Group provided offshore corporation, trust formation and administration services to its US clients. It provided these services first through the Estate Planning and Trust Services unit and later through a wholly owned subsidiary called Rhone Trust and Fiduciary Services SA (“Rhone”).
As of December 31, 2014, the Pictet Group’s private banking division managed or held custody of approximately $165 billion in assets under management (“AUM”). From 2008 to 2014, the Pictet Group served approximately 3,736 private accounts that had US taxpayers as beneficial owners, whose aggregate maximum AUM, including declared assets, was approximately $20 billion.
According to documents filed in Manhattan federal court, even though Pictet Group adopted early measures to confirm that US clients complied with US international tax laws, from 2008 through 2014, the Pictet Group assisted certain US clients with Pictet Group accounts in evading their US tax obligations and otherwise hiding undeclared accounts from the IRS.
In total, from 2008 through 2014, the Pictet Group held 1,637 US Penalty Accounts (I.e. accounts that the Pictet Group and the US Department of Justice agreed that should be subject to penalty as part of the Banque Pictet Deferred Prosecution Agreement) with aggregate maximum AUM of approximately $5.6 billion in January of 2008. The IRS estimates that the US owners of these accounts collectively evaded approximately $50.6 million in US taxes.
Banque Pictet Deferred Prosecution Agreement: How Pictet Group Assisted Its US Clients Evade US taxes
According to the IRS and the US Department of Justice, the Pictet Group assisted its US clients with evading their US taxes by opening and maintaining undeclared accounts for U.S. taxpayer-clients at the Pictet Group, either directly or through external asset managers. The Pictet Group also maintained accounts of certain US clients within the Pictet Group in a manner that allowed the them to further conceal their undeclared accounts from the IRS.
As further detailed below, the Pictet Group used a variety of means to assist its US clients in concealing their undeclared accounts, including by:
- forming or administering offshore entities in whose name the Pictet Group opened and maintained accounts, some of which were undeclared, for its US clients;
- opening and maintaining undeclared accounts in the names of offshore entities formed by others for for its US clients;
- opening and maintaining Private Placement Life Insurance policy accounts, also called insurance wrappers, held in the name of insurance companies but beneficially owned by for its US clients and improperly managed or funded through undeclared accounts at the Pictet Group;
- transferring funds from undeclared accounts to accounts nominally held by non-US clients but still controlled by for its US clients via fictitious donations, thus assisting for its US clients in continuing to maintain undeclared funds offshore;
- providing traditional Swiss banking products such as hold-mail account services (where account-related mail is held at the bank rather than sent to the client) and coded or numbered accounts and
- accepting IRS Forms W-8BEN or Pictet Group’s substitute forms that the group knew or should have known falsely stated or implied under penalty of perjury that offshore entities beneficially owned the assets in the undeclared accounts.
Banque Pictet Deferred Prosecution Agreement: Pictet Group’s Knowledge of Evasion
The IRS and the US Department of Justice state the Pictet Group and certain of its employees knew or should have known that some of their US clients were evading their US tax obligations. In every instance, managing partners approved the opening of new private client relationships and were informed of the closing of US-held accounts, which included some undeclared accounts.
“As it has admitted today, Banque Pictet knowingly conspired to conceal from the IRS the income generated by accounts which held more than $5.6 billion,” said U.S. Attorney Damian Williams for the Southern District of New York.
Banque Pictet Deferred Prosecution Agreement: Fines & Cooperation Requirement
As part of the Deferred Prosecution Agreement, Banque Pictet entered into a deferred prosecution agreement and agreed to pay approximately $122.9 million. This amount consists of: (i) $52,164,201 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2008 and 2014; (ii) $31,844,192 in restitution to the IRS, which represents the unpaid taxes resulting from Banque Pictet’s participation in the conspiracy and (iii) a $38,950,998 penalty.
In addition to the payment, Banque Pictet also agrees under the deferred prosecution agreement to accept responsibility for its conduct by stipulating to the accuracy of an extensive statement of facts. Banque Pictet further agreed to refrain from all future criminal conduct, implement remedial measures and cooperate fully with further investigations into hidden bank accounts.
Specifically, the Bank agreed to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding US-owned accounts. The Bank should also disclose information consistent with the Justice Department’s Swiss Bank Program relating to accounts closed between January 1, 2008, and December 31, 2022.
If Banque Pictet continues to comply with its agreement, the United States has agreed to defer prosecution of Banque Pictet for a period of three years, after which time the United States will seek to dismiss the charge against Banque Pictet.
Banque Pictet Deferred Prosecution Agreement: Lessons
The Banque Pictet Deferred Prosecution Agreement is another in a long string of the IRS victories over the now-defeated Swiss bank secrecy system. The IRS is simply “mopping-up” the left-over issues in Switzerland. Yet, this Agreement is still a major event that has repercussions for US taxpayers with undeclared foreign accounts. Let’s look at the major lessons from this case.
First, the Banque Pictet Deferred Prosecution Agreement is likely to continue to impact its former US clients who transferred their funds out of this Swiss bank to another country or another bank in the hopes of avoiding IRS detection of their prior non-compliance. Under the agreement, Banque Pictet will continue to cooperate with the IRS in the identification of such noncompliant U.S. taxpayers.
Second, this continuous winning streak of the IRS over Swiss banks is likely to act as a continuous deterrent for any banks who wish to help noncompliant US clients not only in Switzerland, but other countries as well.
Finally, noncompliant US taxpayers should look very closely at how easily the IRS won over the former bank secrecy bastion of Switzerland and how eagerly the Swiss banks helped (and continue to help) the IRS and the US Department of Justice to pursue their former US clients. It is important for these taxpayers to realize that there is no true safe haven from the IRS . Even if they have been successfully evading US taxes for years, at any point their noncompliance may be detected by the IRS. These taxpayers should also remember that a deferred prosecution agreement with the bank does not protect any individual US taxpayers from Banque Pictet Deferred Prosecution Agreement
Contact Sherayzen Law Office for Professional Help with Your Undeclared Foreign Accounts
The Banque Pictet Deferred Prosecution Agreement is another reminder on how dangerous the current tax environment is for noncompliant U.S. taxpayers. Therefore, if you have not disclosed your foreign accounts, other foreign assets or foreign income, you contact Sherayzen Law Office as soon as possible. Our team of tax professionals is highly experienced in handling these matters and we can help you!
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