BSI SA, one of the 10 largest private banks in Switzerland, this week became the first bank to reach a resolution under the Department of Justice’s Swiss Bank Program, which provides a means for Swiss banks to resolve potential criminal liabilities in the United States. BSI will pay a $211 million penalty in exchange for a non-prosecution agreement for tax-related criminal offenses.
To be eligible to enter the program, which was established in 2013, Swiss banks were required to advise the Justice Department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S. -related accounts. “The Department’s Swiss Bank Program is an innovative effort to get the financial institutions that facilitated a massive fraud on the American tax system to come forward with information about their wrongdoing—and to ensure that they are held responsible for it,” said Acting Associate Attorney General Stuart Delery. Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.
Under the program, banks are eligible to enter into a non-prosecution agreement (NPA) if they:
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 account holders who fail to come into compliance with U.S. reporting obligations; and
Pay appropriate penalties.
Under the terms of BSI’s NPA, the bank has agreed to cooperate in any related criminal or civil proceedings and demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts.
According to the Justice Department, BSI helped its U.S. clients create sham corporations and trusts that masked the true identity of its U.S. accountholders. Many of its U.S. clients also opened “numbered” Swiss bank accounts that shielded their identities, even from employees within the Swiss bank. BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many U.S. accountholders without names visible on the card itself.
BSI helped U.S. clients not only shield their identity from the Internal Revenue Service, but helped them repatriate cash as well. BSI admitted that its relationship managers and their U.S. clients used code words in e-mails to gain access to funds. BSI disclosed instances where its U.S. clients would use coded language, such as asking their private bankers, “can you download some tunes for us?” or note that their “gas tank is running empty,” when they required additional cash to be loaded to their cards.
BSI had more than 3,000 active United States-related accounts after 2008, many of which it knew were not disclosed in the United States. In resolving its criminal liabilities under the program, BSI provided extensive cooperation and encouraged hundreds of U.S. accountholders to come into compliance. BSI is also assisting with ongoing treaty requests.
BSI and other banks in the Swiss Bank Program are also providing detailed information to the Justice Department about transfers of money from Switzerland to other countries. “We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals,” said Acting Deputy Attorney General Sally Quillian Yates.” The Tax Division and the IRS intend to follow that money to uncover additional tax evasion schemes.