The U.S. Department of Justice announced that Bank Linth LLB AG (Bank Linth) and Bank Sparhafen Zurich AG (BSZ) have reached resolutions under the department’s Swiss Bank Program to avoid potential criminal liabilities in the United States.
“With each agreement signed under the Swiss Bank Program, we are learning more and more about the schemes individuals are employing to hide their assets overseas,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “At this point, the message should be clear. Those who use foreign jurisdictions to evade their U.S. tax obligations will be held fully accountable and pay a heavy price for their conduct.”
Swiss banks which had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts could enter the program provided they were not already under criminal investigation.
Under the program, banks have to disclose all of their cross-border activities, provide detailed information on each individual account in which a U.S. taxpayer has a direct or indirect interest, cooperate with treaty requests for account information, provide information on fund transfers to and from secret accounts and close the accounts of clients who fail to comply with U.S. reporting obligations.
In addition, banks have to pay the appropriate penalties to be eligible for a non-prosecution agreement.
Bank Linth, founded in 1848, provided private banking and asset management services to U.S. taxpayers through private bankers based in Switzerland. The regional bank opened, serviced and profited from accounts for U.S. clients with the knowledge that many were likely not complying with their tax obligations, the Justice Department said.
The bank opened and maintained in the names of sham entities and provided numbered accounts to conceal the identity of account holders. In one case the bank knowingly accepted forms provided by the directors of a sham foundation that falsely represented the ownership of the assets in the account for U.S. federal income tax purposes.
Since Aug. 1, 2008, Bank Linth held 126 U.S.-related accounts, with over $102 million in assets. The bank will pay a penalty of $4.15 million.
The second bank, BSZ, opened, maintained and serviced accounts for U.S. taxpayers 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, the Department of Justice said.
BSZ opened 32 U.S.-related accounts since 2008, and only one of them provided a Form W-9 to BSZ upon opening an account. In most cases, the U.S. persons who opened accounts at BSZ during this period had been required to close their accounts at other Swiss banks and 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 investigations.
BSZ relationship managers assisted U.S. persons in executing waiver forms that directed the bank not to acquire U.S. securities in their accounts. BSZ knew that the purpose and effect of these forms was to avoid disclosing the identities of the U.S. persons to the IRS.
BSZ also offered travel cash cards for up to 10,000 Swiss francs, U.S. dollars or euros to its clients to facilitate access to undeclared funds on deposit at the bank.
Since Aug. 1, 2008, BSZ held 91 U.S.-related accounts, with over $25 million in assets. BSZ will pay a penalty of $1.81 million.
‘Program is working’
Chief Richard Weber of IRS-Criminal Investigation said the latest non-prosecution agreements are proof that the program is working.
“The Swiss Bank Program is proving to be tremendously successful not only for the number of participating banks but for the multiplier effect,” he said. “With the vast amount of information these banks are providing and the investigative skills of IRS-CI special agents, we now have clear roadmaps identifying accountholders and facilitators as well as the ability to track the movement of money to other accounts in other countries. For those who may still be trying to hide cash or assets offshore, your time is up.”