On June 3, 2015, the US Department of Justice (“DOJ”) announced that Banca Credinvest SA (Credinvest Bank), together with Rothschild Bank, signed a Non-Prosecution Agreement that finalized Credinvest Bank’s participation in the DOJ Program for Swiss Banks.
Credinvest Bank History
Located in Lugano, Switzerland, Credinvest Bank started operations as a fully licensed bank in 2005. Credinvest Bank offered a variety of services that it knew could assist, and that did assist, U.S. clients in concealing assets and income from the IRS, including hold mail service and numbered accounts. Credinvest Bank did not set up any formalized internal reporting regarding U.S. clients and did not adopt any procedures to ascertain or monitor the compliance of its U.S. clients with their U.S. tax obligations. In late 2008, an external asset manager referred 11 accounts to Credinvest Bank, all of which were for U.S. clients who had left UBS. The bank delegated to that external asset manager the primary management of those accounts and failed to ascertain the compliance of those clients with their U.S. tax obligations. The bank thus aided and assisted those clients in concealing their accounts from U.S. authorities. Since August 1, 2008, Credinvest Bank had 31 U.S.-related accounts with just over $24 million in assets.
Credinvest Bank Penalty and Disclosures
As other banks in the DOJ Program for Swiss Banks, Credinvest Bank mitigated some of its penalties, but it will still have to pay a penalty of $3.022 million.
In addition, as part of its participation in the DOJ Program for Swiss Banks, Credinvest Bank made a complete disclosure of its cross-border activities, provided detailed information on an account-by-account basis for accounts in which US taxpayers have a direct or indirect interest, and provided detailed information regarding transferred funds to other banks. It is not known at this point if the IRS made any treaty requests to Credinvest Bank.
The most immediate impact of Rothschild Bank Non-Prosecution Agreement will be felt by US accountholders who wish to enter OVDP after June 3, 2015 – their penalty rate will go up from 27.5 percent of the highest value of their foreign accounts and other assets included in the OVDP penalty base to a whopping 50 percent penalty rate.
What Credinvest Bank Non-Prosecution Agreement Means to US Taxpayers
Credinvest Bank Non-Prosecution Agreement is likely to have three important consequences for US taxpayers with undisclosed accounts. First, US taxpayers with undisclosed accounts at Credinvest Bank will now face the higher 50% penalty rate in the OVDP program, instead of the regular 27.5% penalty rate.
Second, US taxpayers who attempted to conceal their Credinvest Bank accounts by closing them and transferring them to other banks will now face an increased risk of IRS detection due to the fact that the IRS now has the transfer information from Credinvest Bank. It is also possible that they may have received this information as part of another Swiss bank’s disclosure under the DOJ Program for Swiss Banks.
Finally, Credinvest Bank participation in the DOJ Program for Swiss Banks is one more reminder that, in this FATCA world, US taxpayers with undisclosed foreign accounts are playing a Russian roulette with their future by persevering in their non-compliance. The IRS may receive information regarding their accounts from various sources – DOJ Program is just one of them.
US Taxpayers With Undisclosed Foreign Accounts Should Explore Voluntary Disclosure
At this point, if you are a US taxpayer with undisclosed foreign accounts, please consult the experienced international tax team of Sherayzen Law Office. Our professional legal team has helped hundreds of US taxpayers around the world and we can help you!