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Four Swiss Banks Sign Non-Prosecution Agreements

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On May 28, 2015, four Swiss Banks – Société Générale Private Banking (Lugano-Svizzera), MediBank AG, LBBW (Schweiz) AG and Scobag Privatbank AG – signed Non-Prosecution Agreements under the Department of Justice Swiss Bank Program. These four Swiss banks now increased the list of the Swiss Banks that reached the resolution under the Program to the total of seven as of May 31, 2015.

Four Swiss Banks and Swiss Bank Program

The Swiss Bank Program was announced on August 29, 2013. It offered a path to Swiss banks to resolve all of their potential criminal liabilities in the United States in exchange for voluntarily turning over information regarding certain activities and detailed information regarding US-help financial accounts. Category 2 banks were also supposed to pay certain penalty under the rules specified by the Program.

All of the four Swiss Banks entered the Program and signed the Non-Prosecution Agreements on May 28. Under the program, the banks made a complete disclose of their cross-border activities, provided detailed account-by-account information for US-held accounts (direct and indirect interest), promised to cooperated with any treaty requests regarding account information, provided detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed, agreed to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations, and paid appropriate penalties.

Compliance History of the Four Swiss Banks

The DOJ gave a fairly detailed history of all four Swiss Banks.

The largest of the four Swiss Banks – Société Générale Private Banking (Lugano-Svizzera) SA (SGPB-Lugano) – was established in 1974 and is headquartered in Lugano, Switzerland. Through referrals and pre-existing relationships, SGPB-Lugano accepted, opened and maintained accounts for U.S. taxpayers, and knew that it was likely that certain U.S. taxpayers who maintained accounts there were not complying with their U.S. reporting obligations. Since Aug. 1, 2008, SGPB-Lugano held and managed approximately 109 U.S.-related accounts, with a peak of assets under management of approximately $139.6 million, and offered a variety of services that it knew assisted U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS), including “hold mail” services and numbered accounts. Some U.S. taxpayers expressly instructed SGPB-Lugano not to disclose their names to the IRS, to sell their U.S. securities and to not invest in U.S. securities, which would have required disclosure and withholding. In addition, certain relationship managers actively assisted or otherwise facilitated U.S. taxpayers in establishing and maintaining undeclared accounts in a manner designed to conceal the true ownership or beneficial interest in the accounts, including concealing undeclared accounts by opening and maintaining accounts in the name of non-U.S. entities, including sham entities, having an officer of SGPB-Lugano act as an officer of the sham entities, processing cash withdrawals from accounts being closed and then maintaining the funds in a safe deposit box at the bank and making “transitory” accounts available, thereby allowing multiple accountholders to transfer funds in such a way as to shield the identity and account number of the accountholder. SGPB-Lugano will pay a penalty of $1.363 million.

Created in 1979 and headquartered in Zug, Switzerland, MediBank AG (MediBank) provided private banking services to U.S. taxpayers and assisted in the evasion of U.S. tax obligations by opening and maintaining undeclared accounts. In furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes, MediBank failed to comply with its withholding and reporting obligations, providing “hold mail” services and offering numbered accounts, thus reducing the ability of U.S. authorities to learn the identity of the taxpayers. After it became public that the Department of Justice was investigating UBS, MediBank hired a relationship manager from UBS and permitted some of that person’s U.S. clients to open accounts at MediBank. Since Aug. 1, 2008, MediBank had 14 U.S. related accounts with assets under management of $8,620,675. MediBank opened, serviced and profited from accounts for U.S. clients with the knowledge that many likely were not complying with their U.S. tax obligations. MediBank will pay a penalty of $826,000.

Of the four Swiss banks, it appears that LBBW (Schweiz) AG (LBBW-Schweiz) had the largest average balances per US-help account. Since August 2008, LBBW-Schweiz held 35 U.S. related accounts with $128,664,130 in assets under management. After it became public that the department was investigating UBS, LBBW-Schweiz opened accounts from former clients at UBS and Credit Suisse. Despite its knowledge that U.S. taxpayers had a legal duty to report and pay tax on income earned on their accounts, LLBW-Schweiz permitted undeclared accounts to be opened and maintained, and offered a variety of services that would and did assist U.S. clients in the concealment of assets and income from the IRS. These services included following U.S. accountholders instructions not to invest in U.S. securities and not reporting the accounts to the IRS and agreeing to hold statements and other mail, causing documents regarding the accounts to remain outside the United States. LBBW-Schweiz will pay a penalty of $34,000.

Headquartered in Basel, Switzerland, Scobag Privatbank AG (Scobag) was founded in 1968 to provide financial and other services to its founders, and obtained its banking license in 1986. Since August 2008, Scobag had 13 U.S. related accounts, the maximum dollar value of which was $6,945,700. Scobag offered a variety of services that it knew could and did assist U.S. clients in the concealment of assets and income from the IRS, including “hold mail” services and numbered accounts. Scobag will pay a penalty of $9,090.

It is interesting to note that, out of the four Swiss Banks, LBBW-Schweiz and Scobag paid the least penalties. Undoubtedly, the reason lies in the mitigation of penalties due to accounts disclosed by US person as part of their OVDP compliance.

Non-Prosecution Agreements and Four Swiss Banks

According to the terms of the non-prosecution agreements signed today, each of the Four Swiss Banks 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 the penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

“[These Non-Prosecution] agreements reflect the Tax Division’s continued progress towards reaching appropriate resolutions with the banks that self-reported and voluntarily entered the Swiss Bank Program,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “The department is currently investigating accountholders, bank employees, and other facilitators and institutions based on information supplied by various sources, including the banks participating in this Program. Our message is clear – there is no safe haven.”

Contact Sherayzen Law Office for Professional Help With Your Voluntary Disclosure

As Swiss Banks (in addition to the four Swiss Banks mentioned in this article) sign Non-Prosecution Agreements and turn over information to the DOJ, the US taxpayers with undisclosed accounts in Switzerland, Cayman Islands, Israel, Lebanon, Panama, Singapore and other related foreign jurisdictions are operating under the increased risk of the IRS detection. Moreover, the on-going FATCA compliance introduces a similarly insupportable risk to US taxpayers worldwide.

The IRS discovery of your undisclosed foreign accounts may result in potentially catastrophic consequences, including criminal penalties and incarceration.

This is why, if you have undisclosed foreign financial accounts and any other foreign assets, contact Sherayzen Law Office professional help. Our experienced legal team will thoroughly analyze your case, determine your existing penalty exposure, analyze your voluntary disclosure options and implement the entire voluntary disclosure plan (including preparation of tax forms and legal documents).

Contact Us Today to Schedule Your Confidential Consultation!

Finter Bank Zurich AG Reaches Resolution with US DOJ

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On May 15, 2015, Finter Bank Zurich AG (Finter Bank) became the third Swiss bank to sign a Non-Prosecution Agreement with US DOJ according to the terms of the DOJ Program for Swiss Banks.

DOJ Program for Swiss Banks

On August 29, 2013, the DOJ announced the creation of the “The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program)” with the goal or creating a voluntary disclosure program for Swiss banks. Under the Program, the Swiss banks would prove DOJ with detailed description of specified activities with respect to US-owned accounts as well as the identification of all accounts held by US persons at any point since August of 2008. In exchange, the Program promised Swiss banks an opportunity to forever resolve their past US non-compliance issues (including criminal illegal activities) with respect to US-held accounts. For Category 2 banks, the Program also imposed various penalty requirements. The banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Finter Bank timely entered the Program and payed the required penalties. This is why it became the third Swiss bank to resolve its issues under the Program.

Finter Bank Background

Finter Bank was founded in 1958 in Chiasso, Switzerland, and has a branch office in Lugano, Switzerland. Since August 1, 2008, Finter Bank has maintained 283 U.S.-related accounts with an aggregate maximum balance of approximately $235 million.

Since its establishment and continuing through at least October 2011, Finter Bank, through its managers, employees and others, 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 from the Internal Revenue Service (IRS). After August 2008, when Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by U.S. tax authorities, Finter Bank accepted accounts from U.S. persons exiting other Swiss banks.

Finter Bank provided services that allowed U.S. clients to eliminate the paper trail associated with the undeclared assets and income, including “hold mail” services and numbered and coded accounts. In addition, Finter Bank assisted clients in using sham entities as nominee beneficial owners of undeclared accounts, solicited Forms W-8BEN that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts, and provided cash cards and credits cards linked to the undeclared accounts.

Finter Bank Non-Prosecution Agreement

According to the terms of the non-prosecution agreement signed on May 15, Finter Bank 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 a $5.414 million penalty in return for the department’s agreement not to prosecute Finter Bank for tax-related criminal offenses.

Consequences of Finter Bank Non-Prosecution Agreement for US Taxpayers

In resolving its criminal liabilities under the program, Finter Bank encouraged U.S. accountholders to come into tax compliance and participate in the IRS Offshore Voluntary Disclosure Program. However, the taxpayers who did not listen to Finter Bank’s pleas and have not disclosed their secret Swiss accounts now face an importance consequence as a result of Finter Bank Non-Prosecution Agreement – if these taxpayers wish to enter the OVDP now, the penalty percentage has increased from 27.5 percent to 50% of the highest balance of their accounts for the past eight years.

Contact Sherayzen Law Office for Help With Disclosure of Your Foreign Bank Accounts

If you have undisclosed foreign bank accounts and any other assets, you should contact Sherayzen Law Office for professional help as soon as possible. Our legal team consists of tax professionals who specialize in offshore voluntary disclosures and have helped hundreds of US taxpayers around the world.

We can help You! Contact Us to Schedule Your Confidential Consultation Now!

FBAR Penalties

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In this essay, I would like to discuss some of the penalties that may be imposed as a result of the failure to file the FBAR even though you were required to do so. In particular, I will focus on three general scenarios describing specific penalties commonly attributed to each of them. The first scenario is where you willfully failed to file the FBAR, or destroyed or otherwise failed to maintain proper records of account, and the IRS learned about it when it launched an investigation. This is the worst type of scenario which carries substantial penalties. The IRS may impose civil penalties of up to the greater of $100,000, or 50 percent of the value of the account at the time of the violation, as well as criminal penalties of up to $500,000, or 10 years of imprisonment, or both.

Another scenario is where you negligently and non-willfully failed to file the FBAR, and the IRS learned about it during an investigation. Unlike the first scenario, there are no criminal penalties for non-willful failure to file the FBAR; only civil penalties of up to $10,000 per each violation (unless there is a pattern of negligence which carries additional civil penalties of no more than $50,000 per any violation). In this situation, you are likely to fare much better, and you may even be able to obtain lower penalties by showing of reasonable cause for the failure to file.

The third scenario is where you non-willfully fail to file the FBAR, accidentally discover your mistake, and come to an attorney to file a delinquent FBAR before the IRS commences its investigation of your finances. This is the most favorable of all scenarios due to the fact that you may qualify for the benefits of a voluntary disclosure program, despite the fact that the position of the IRS regarding civil penalties for voluntarily filed but delinquent FBARs is uncertain following the October 15, 2009 voluntary disclosure deadline (now ended). The best strategy for addressing delinquent FBARs, however, varies depending on the facts and circumstances of the particular case.

A word of caution: this discussion focuses solely on the penalties associated with the failure to file the FBAR. This essay does not address the various strategies that may be employed in dealing with the delinquent FBAR filings in the post-October 15, 2009 world, including qualification for the voluntary disclosure program. In certain situations, there may also be other relevant significant tax issues outside of the FBAR realm – the most important of which is non-payment of taxes on undisclosed income by the U.S. taxpayers – which may significantly alter the amount of penalties, interest, and taxes due to the IRS.

FBAR: Aggregate Value Requirement

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FBAR filing is required only if the aggregate balances of a U.S. person‘s foreign financial accounts exceed $10,000.

Despite appearances, the requirement that the aggregate value of all of the foreign financial accounts exceeds $10,000 at any time during a calendar year is not without complications. In order to figure out the account value in a calendar year, one needs to look first at the largest amount of currency and/or monetary instruments that appear on any quarterly or more frequently issued account statement for the relevant year. If the financial institution which manages the account does not issue any periodic account statements, then the maximum account value is the largest amount of currency and/or monetary instruments in the account at any time during the applicable year. If the account consists of stocks or other non-monetary assets, then one only needs to consider fair market value at the end of the relevant year. If, however, the non-monetary assets were withdrawn before the end of the calendar year, then the account value is determined to be the fair market value of the withdrawn assets at the time of the withdrawal.

The maximum value of a foreign financial account must be reported in U.S. dollars on the FBAR. Therefore, a taxpayer needs to convert foreign currency into the corresponding amount of U.S. dollars using the official exchange rate at the end of the relevant calendar year.

A final word of caution on the topic of the account balance. Notice the word “aggregate” – it means that the balances of all of the filer’s foreign financial accounts should be tallied to determine whether the $10,000 threshold is exceeded. For example, if the filer has one foreign bank account of $6,000 and another of $5,000, then he still needs to file the FBAR with the DOT, because the aggregate value of both accounts exceeds the required $10,000.

Deciding whether you are required to file the FBAR is a complicated process. Sherayzen Law Office can help you!

Call now to discuss your situation with an experienced tax attorney!