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Swiss Bank Program Update: Bank Zweiplus and Banca Stato del Cantone Ticino

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On August 20, 2015, the US Department of Justice announced another Swiss Bank Program update – Bank Zweiplus AG (Bank Zweiplus) and Banca dello Stato del Cantone Ticino (Banca Stato) have reached resolutions under the department’s Swiss Bank Program.

The Swiss Bank Program, which was announced on August 29, 2013, provides 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 Bank Program Update: Bank Zweiplus Background and Non-Prosecution Agreement

As part of its Swiss Bank Program Update, the DOJ provided various background information regarding Bank Zweiplus. The Bank was founded in July 2008 as a retail bank based in Zurich. Offices located in Geneva and Basel, Switzerland, were closed in 2008 and 2012, respectively. Since Aug. 1, 2008, Bank Zweiplus maintained and serviced 44 U.S.-related accounts with an aggregate value of approximately $12.1 million.

Bank Zweiplus was aware that U.S. taxpayers have a legal duty to report to the Internal Revenue Service (IRS) their ownership of bank accounts outside the United States and to pay taxes on income earned in such accounts. Nevertheless, in disregard of U.S. laws, the bank provided a variety of traditional Swiss banking services that assisted some U.S. taxpayers in concealing their undeclared accounts. For example, Bank Zweiplus maintained numbered accounts and accounts held in the name of structures which were effectively owned or controlled by U.S. persons, including structures in the British Virgin Islands and the Bahamas.

Bank Zweiplus cooperated with the department during its participation in the Swiss Bank Program and encouraged its U.S. clients to enter the IRS Offshore Voluntary Disclosure Program (nowclosed). Bank Zweiplus will pay a penalty of $1.089 million.

Swiss Bank Program Update: Banca Stato Background and Non-Prosecution Agreement

As part of its Swiss Bank Program Update, the DOJ provided various background information regarding Banca Stato. Banca Stato was established in 1915 and is headquartered in Bellinzona, Switzerland. Banca Stato was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on the basis of all of their income, including income earned in accounts that the U.S. taxpayers maintained at the bank. Despite this, the bank opened and serviced accounts for U.S. clients who the bank knew or had reason to know were not complying with their U.S. income tax obligations.

During the applicable period, Banca Stato maintained and serviced 187 U.S.-related accounts with an aggregate maximum balance of approximately $137 million. Banca Stato will pay a penalty of $3.393 million.

Impact of this Swiss Bank Program Update on US Taxpayers

Starting August 20, 2015, noncompliant U.S. accountholders at Bank Zweiplus and Banca Stato must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Follow this link to the DOJ website for more information on this Swiss Bank Program Update.

Credinvest Bank Signs Non-Prosecution Agreement

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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!

Contact US to Schedule Your Confidential Consultation Now!