OVDP Penalty Increased To 50% For 34 Foreign Banks!

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. HSBC India
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15. Finter Bank Zurich AG (effective 5/15/15)
16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17. MediBank AG (effective 5/28/15)
18. LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15) 
20. Rothschild Bank AG (effective 6/3/15)
21. Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
    
23. Berner Kantonalbank AG (effective 6/9/15)
24. Bank Linth LLB AG (effective 6/19/15)
    
25. Bank Sparhafen Zurich AG (effective 6/19/15)
26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
27. Privatbank Von Graffenried AG (effective 7/2/15)
28. Banque Pasche SA (effective 7/9/15) 
29. ARVEST Privatbank AG (effective 7/9/15)
30. Mercantil Bank (Schweiz) AG, (effective 7/16/15)
31. Banque Cantonale Neuchâteloise, (effective 7/16/15)
32. Nidwaldner Kantonalbank, (effective 7/16/15)
33. SB Saanen Bank AG (effective 7/23/15)
34. Privatbank Bellerive AG.  (effective 7/23/15)

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.


In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

“With each Additional Agreement, 
the world where criminals can hide their money 
is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

Taxpayers who had undeclared income from one of these 25 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 31 Banks Delivering Names to the IRS?

Do You Value Your Freedom?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243

2 More Swiss Banks Agree to Turn Over Names of US Depositors

SB Saanen Bank AG, a 141-year-old institution, will pay $1.37 million, while Privatbank Bellerive AG will pay $57,000, the Justice Department says in a statement.

On July 17, 2015 we posted 3 More Swiss Banks Agree to Turn Over Names of US Depositors, bring the Total to 32 Banks!" well make that 34 now.

Now the Department of Justice announced  on July 23, 2015 that SB Saanen Bank AG and Privatbank Bellerive AG have reached resolutions under the department’s Swiss Bank Program.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
• Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Swiss banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreements signed, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

“The days of safely hiding behind 
shell corporations and numbered bank accounts are over,” 

said Acting Assistant Attorney General Caroline D. Ciraolo 

of the Department of Justice’s Tax Division.

SB Saanen Bank AG is headquartered in Saanen, Switzerland.  It was founded in 1874 and has branches in the neighboring villages of Gstaad, Gsteig and Lauenen, as well as a retail office in Schönried. 

Prior to Aug. 1, 2008, and thereafter, SB Saanen accepted accounts from U.S. taxpayers, some of whom had undeclared accounts and wished to take advantage of Swiss bank secrecy laws. 

SB Saanen offered a variety of traditional Swiss banking services which could and did assist U.S. clients in concealing assets and income from the Internal Revenue Service (IRS), including numbered or pseudonym accounts and holding mail at the bank.  These services helped U.S. clients to eliminate the presence of documents in the United States that associated the U.S. taxpayer’s name with the undeclared assets and income they held at SB Saanen in Switzerland.  In some instances, SB Saanen permitted accounts to be closed with large cash withdrawals, precious metals or transfers of funds to accounts held by non-U.S. persons.  SB Saanen had reason to believe that such an accountholder was taking that action to avoid detection by U.S. tax authorities. 

In December 2008, SB Saanen’s board of directors decided that it should continue to manage U.S. clients and open new accounts for U.S. clients on the condition that they had a “link to our region or one of our relationship managers.”  As a result, SB Saanen opened accounts for some U.S. taxpayers who transferred accounts from other Swiss institutions that were closing such accounts.  SB Saanen knew, or had reason to know, that two of those accounts were undeclared.  SB Saanen continued to service U.S. taxpayers even though it had reason to believe that some of them were evading U.S. taxes.


An SB Saanen procedural manual, dated November 2009 and related to the directive, warned its employees to minimize U.S-related contacts with undeclared U.S. clients.  The manual required relationship managers to obtain an IRS Form W-9 for new U.S. clients and stated, with respect to existing U.S. clients, that “clients who do not want disclosure to the IRS (American tax authority) may not be contacted at all in the U.S.A. and/or other countries!  Contact is only permissible within [Switzerland].”


In 2009, SB Saanen implemented a policy with respect to foreign travel by its relationship managers.  Pursuant to that policy, travel was permitted to the United States to meet with U.S. clients so long as it was approved in advance by SB Saanen’s chief executive officer and subject to restrictions.  For example, under the policy, SB Saanen declared that “No files may be taken abroad,” relationship managers must “complete a training course,” relationship managers “may not actively acquire” new customers, there was to be “no signing of business documents” or “accepting of orders” or providing “investment advice,” and bank employees were prohibited from “handing over cash, securities, or objects.”  In 2010 and 2011, SB Saanen’s then-head of private banking, who is no longer employed by the bank, traveled to the United States to entertain U.S. clients at the U.S. Open tennis championship in Flushing Meadows, New York.


Since Aug. 1, 2008, SB Saanen maintained three U.S.-related accounts for individual U.S. taxpayers who opened the account in the name of a non-U.S. entity, such as offshore corporations or trusts.  Those three accounts comprised an aggregate value of approximately $5 million.  SB Saanen was not involved in creating these entities, but it was aware that some U.S. clients created and used such non-U.S. entities to hold Swiss bank accounts to avoid their disclosure to, or otherwise be concealed from, U.S. tax authorities.


The undeclared U.S.-related accounts maintained at SB Saanen include one instance in 2011 where SB Saanen assisted a U.S. taxpayer-client in the transfer of securities from his undeclared account to that of a Jersey company with a non-U.S. person as its beneficial owner.  SB Saanen allowed the transfer of funds even though the Jersey corporation had not completed all required bank documents.  In January and March 2012, the U.S. accountholder closed his account and transferred an additional $4.3 million to an account at SB Saanen held in the name of his wife, who was not a U.S. citizen.
Since Aug. 1, 2008, SB Saanen maintained 110 U.S.-related accounts with a maximum aggregate value of approximately $62 million.  SB Saanen will pay a penalty of $1.365 million.


Privatbank Bellerive AG was founded in 1988, and its sole office is in Zurich.  Bellerive was aware that U.S. taxpayers had a legal duty to report to the IRS and pay taxes on all of their income, including income earned in accounts that these U.S. taxpayers maintained at the bank.  Bellerive knew that it was likely that some of its U.S. customers who maintained accounts at the bank were not complying with their tax and reporting obligations under U.S. law. 


In two instances, U.S. accountholders, with the assistance of their external asset managers, created Panamanian corporations and paid a fee to third parties to act as directors.  The companies’ directors were two trust companies based in Panama.  Those third parties, at the direction of the U.S. accountholder, opened a bank account at Bellerive in the name of the entity.  Bellerive made no effort to determine whether such an entity was valid for U.S. tax purposes.  In those circumstances involving a non-U.S. entity, Bellerive was aware that a U.S. person was the true beneficial owner of the account.


Prior to Nov. 1, 2000, Bellerive required individuals subject to federal income tax under the U.S. Internal Revenue Code and who were beneficial owners of accounts to sign a “Form 1,” titled “W-9 Custodian Waiver.”  The “Form 1” contained two statements from which the beneficial owner could choose one option.  The first of the two options stated: “I would like to avoid disclosure of my identity to the U.S. tax authorities under the new tax regulations.  To this end, I declare that I expressly agree that my account shall be frozen for all new investments in U.S. securities as from November 1, 2000.”  Bellerive knew or had reason to know that the four U.S. accountholders who signed this option were engaged in tax evasion.


An internal Bellerive memorandum dated Sept. 16, 2008, from the then-head of Legal Compliance and Risk, stated that “all Swiss banks have set up the following rules for dealing with U.S. clients:

• Absolutely no contact as long as the client is on U.S. territory, even if the contact has been initiated by the client, including phone calls, e-mails, etc.;
• The client may only take up contact with the bank, if he is not in the United States;
• Assets may only be managed via a discretionary mandate, or not at all (cash on current account); and
• No mail correspondence allowed, hold mail agreements however are permitted.”

Bellerive had hold-mail agreements with its 20 U.S.-related accountholders both before and after the date of the memorandum.


Since Aug. 1, 2008, Bellerive maintained 20 U.S.-related accounts, comprising a total of $68.9 million in assets under management.  Bellerive will pay a penalty of $57,000.


In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.


With this announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Do You Have Undeclared Income from a Swiss Bank

 Who Is Handing Over Names to the IRS?

 

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini& Associates, P.A.  

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243(888)

Required Records Doctrine Trumps 5th Amendment Defense For Overseas Accounts!

On August 29, 2012 we posted Fifth Amendment Does Not Apply to Offshore Banking Records, where we discussed that the Fifth Amendment privilege against self-incrimination does not apply to records that fall under the Required Records Doctrine, and a taxpayer who is the subject of a grand jury investigation into his use of offshore bank accounts cannot invoke the privilege to resist compliance with a subpoena seeking records kept pursuant to the Bank Secrecy Act, the U.S. Court of Appeals for the Seventh Circuit ruled Aug. 27 (In re Special February 2011-1 Grand Jury Subpoena DatedSeptember 12, 2011, 7th Cir., No. 11-3799, 8/27/12). 

Now the Third Circuit ruled that a married couple must turn over their foreign bank account records to the Internal Revenue Service, saying the couple can’t shield themselves by asserting their Fifth Amendment right against self-incrimination.

Upholding a lower court, the three-judge panel enforced IRS demands for information on undisclosed accounts allegedly held by Eli and Renee Chabot at HSBC Bank, citing an exception to the Fifth Amendment privilege for records that are required to be maintained by law. (Required Records Doctrine)

In 2010, French authorities tipped off the IRS to several U.S. citizens holding undisclosed accounts with HSBC. One of the accounts belonged to Pelsa Business Inc., an entity where Eli Chabot was the beneficial owner, the IRS was told.

The agency responded in 2012 by issuing summonses to the Chabots to testify and produce documentation on their foreign bank accounts, but the couple held to their Fifth Amendment rights and declined. The IRS later revised the summonses to limit their scope only to records that holders of foreign bank accounts are required to keep under the Bank Secrecy Act of 1970, but the Chabots again refused to comply.

On appeal, the Chabots’ arguments can be summarized as follows:

(1) allowing the government to rely on the required records exception to enforce the summonses in this case will lead to general governmental abrogation of the Fifth Amendment privilege for any “failure to report” crime; 

(2) the information that would be gleaned from compliance with the summonses is almost identical to what the government needs to charge the Chabots with the felony of willful failure to report an overseas account in the Report of Foreign Bank and Financial Accounts, thus requiring the Chabots to incriminate themselves; and

(3) the records that 31 C.F.R. § 1010.420 requires accountholders to keep do not satisfy the three-pronged test for applying the required records exception to the Fifth Amendment privilege.

The government’s response to these arguments is that the Chabots’ records fall within the required records exception to the Fifth Amendment privilege. Therefore, the questions before the panel are whether the Chabots’ account records fall within the required records exception to the Fifth Amendment privilege and, if so, whether the Chabots’ policy concerns are insurmountable barriers to our application of this exception.

Unpersuaded by the overriding effect of the stated concerns, we conclude that the Chabots’ account records fall squarely within the required records exception to the Fifth Amendment privilege.

Therefore, we will affirm the District Court’s grant of the IRS’s petition. The case is U.S.A. v. Chabot et al., case number 14-4465, in the U.S. Court of Appeals for the Third Circuit.

Do You Have Undeclared Income from an Offshore Bank IRS?

 

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini& Associates, P.A.  

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243

OVDP Penalty Increased To 50% For 31 Foreign Banks!

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. HSBC India
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15. Finter Bank Zurich AG (effective 5/15/15)
16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17. MediBank AG (effective 5/28/15)
18. LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15) 
20. Rothschild Bank AG (effective 6/3/15)
21. Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
    
23. Berner Kantonalbank AG (effective 6/9/15)
24. Bank Linth LLB AG (effective 6/19/15)
    
25. Bank Sparhafen Zurich AG (effective 6/19/15)
26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
27. Privatbank Von Graffenried AG (effective 7/2/15)
28. Banque Pasche SA (effective 7/9/15) 
29. ARVEST Privatbank AG (effective 7/9/15)
30. Mercantil Bank (Schweiz) AG, (effective 7/16/15)
31. Banque Cantonale Neuchâteloise, (effective 7/16/15)
32. Nidwaldner Kantonalbank, (effective 7/16/15)

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.


In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

“With each Additional Agreement, 
the world where criminals can hide their money 
is becoming smaller and smaller.  Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

Taxpayers who had undeclared income from one of these 25 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 31 Banks Delivering Names to the IRS?

Do You Value Your Freedom?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid (888) 882-9243

3 More Swiss Banks Agree to Turn Over Names of US Depositors

On Monday, July 13, 2015, we posted 2 More Swiss Banks Agree to Turn Over Names of US Depositors Bring the Total to 29 Banks!" well make that 31 now.

Now the Department of Justice announced  on July 16, 2015 that Mercantil Bank (Schweiz) AG, Banque Cantonale Neuchâteloise and Nidwaldner Kantonalbank have reached resolutions under the department’s Swiss Bank Program.

Mercantil Bank (Schweiz) AG is based in Zurich and initiated operations in 1988.  Its main focus is private banking, which offers wealth management services to individuals and private investment companies.  Mercantil opened, serviced and profited from accounts for U.S. clients and knew or should have known that many of its U.S. clients were likely not complying with their tax obligations.  Its cross-border banking business 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.  Until 2010, Mercantil maintained a U.S. toll-free telephone number to service its customers. 

Mercantil used a variety of means that could and did assist U.S. clients in concealing their accounts, including hold mail and code name or numbered account services, thereby ensuring that documents reflecting the existence of the accounts could remain outside the United States, beyond the reach of U.S. tax authorities and protected by Swiss banking secrecy laws.  Mercantil also assisted clients in opening and maintaining accounts in the names of sham entities.  For example, Mercantil provided accounts for what were referred to as “Personal Investment Companies” through its private banking unit.  Where there was no active, ongoing business, it was Mercantil’s practice to ignore the form of the structures and to treat the beneficial owners of the entity as the accountholders in substance. 

Mercantil provided services to the accounts knowing that they could be used for evasion or avoidance of tax obligations.  On one occasion in March 2008, Mercantil opened an account for a bank executive with U.S. citizenship in the name of a Panamanian holding company.  In that instance, Mercantil accepted and included in account records forms provided by the director of the Panamanian company that falsely represented the ownership of the account for U.S. federal income tax purposes.

Since Aug. 1, 2008, Mercantil held a total of 116 U.S.-related accounts with a maximum aggregate value totaling over $59.8 million.  Mercantil will pay a penalty of $1.172 million.

“The days of safely hiding behind 
shell corporations and numbered bank accounts are over,” 

said Acting Assistant Attorney General Caroline D. Ciraolo 

of the Department of Justice’s Tax Division.

Banque Cantonale Neuchâteloise (BCN) was formed in 1883 and is headquartered in the city of Neuchâtel, Switzerland.  BCN 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.  BCN knew or had reasons to know that it was likely that certain U.S. taxpayers were maintaining undeclared accounts at BCN in order to evade their U.S. tax obligations in violation of U.S. law.

BCN provided traditional Swiss banking services that it knew could assist, and that did in fact assist, certain U.S. taxpayers to evade their U.S. tax obligations and otherwise hide accounts held at BCN from the Internal Revenue Service (IRS).  For example, after it became public that the department was investigating the conduct of UBS, and later other Swiss banks, BCN allowed several U.S. persons to open accounts at BCN and transfer funds into those BCN accounts from the banks under investigation.

BCN provided numbered accounts and agreed to hold bank statements and other mail relating to accounts at BCN, rather than send them to U.S. taxpayers located in the United States, thereby ensuring that documents reflecting the existence of the accounts remained outside the United States and beyond the reach of U.S. tax authorities.  In some instances, BCN permitted accounts to be held by Swiss or, in one case, foreign non-operating entities that were ultimately beneficially owned by U.S. persons.  By permitting U.S. accountholders to hold their accounts in the name of non-operating entities, BCN thus enabled U.S. accountholders to conceal their identity from the U.S. government.  Until 2014, BCN permitted its U.S. accountholders to withdraw funds in cash both by withdrawing sums below $10,000 and, in some cases, withdrawing larger sums of cash when closing their accounts.

As part of its participation in the Swiss Bank Program, BCN has provided certain account information related to U.S. taxpayers which may assist the government in making requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders.

Since Aug. 1, 2008, BCN had 190 U.S. clients with a total of 595 U.S.-related accounts.  The maximum dollar value, in the aggregate, of all accounts associated with U.S. taxpayers at BCN was approximately $67.5 million.  BCN will pay a penalty of $1.123 million.


Nidwaldner Kantonalbank (NKB), established in 1879, is a public and registered cantonal bank in Switzerland owned by the canton of Nidwalden, Switzerland.  Despite understanding that U.S. taxpayers had a legal duty to report to the IRS and to pay taxes on income earned in accounts maintained in Switzerland, NKB opened and maintained undeclared accounts for U.S. taxpayers.  NKB chose to continue to service U.S. clients without disclosing their identity to the IRS and without regard for the impact of U.S. criminal law on that decision.

NKB offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS.  These services included hold mail and numbered accounts.  NKB also allowed U.S. nationals with Swiss relatives to open accounts, even in circumstances where NKB was or should have been aware that the accounts were not declared in the United States.

In several instances, requirements of an agreement NKB had with the IRS, in particular with respect to requiring IRS Forms W-9 from U.S. clients, were either not followed or were waived by NKB.  For example, in one case, NKB knowingly waived the W-9 requirement for an account from a bank under investigation by the department.  This allowed the accountholders, both U.S. citizens and residents, to hold U.S. securities in the account without disclosure of the account to the IRS.  NKB’s failure to comply with its reporting and withholding obligations allowed these and other U.S. accountholders to conceal their accounts from U.S. authorities.

One external asset manager had a relationship with an NKB banker and brought five accounts to NKB, including some from Credit Suisse.  One of these accounts held U.S. securities through a life insurance policy (an “insurance wrapper”) for the benefit of a U.S. person, allowing the account to hold U.S. securities without disclosure to U.S. authorities.  NKB accepted another account from UBS that was owned by an individual who was a foreign national and U.S. resident.  At the time it approved the account, NKB was aware that the client left UBS because he was concerned about the U.S. government’s activities in investigating U.S. persons with accounts at that bank.

During the Applicable Period, NKB held a total of 95 U.S.-related accounts with a peak value of assets under management of approximately $30.5 million.  NKB will pay a penalty of $856,000.
In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Under the program, banks are required to:

 

· Make a complete disclosure of their cross-border activities;

· Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

· Cooperate in treaty requests for account information;

· Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);

· Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and

· Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

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Want to Know if the OVDP Program is Right for You?

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