Swiss Life Holding, Switzerland’s largest life insurance company, and three of its subsidiaries entered a deferred prosecution agreement (DPA) and will pay $77.4 million for conspiring with U.S. taxpayers to conceal more than $1.4 billion in offshore insurance policies, the Department of Justice announced Friday.
Swiss Life and its affiliated insurance carriers—Swiss Life Liechtenstein, Swiss Life Singapore, and Swiss Life Luxembourg—admitted to the scheme, which ran from 2005 to 2014, according to the Justice Department. The $77.4 million payment includes $16.3 million in restitution to the Internal Revenue Service (IRS); forfeiture of $35.8 million to the United States; and a penalty of approximately $25.2 million.
Additionally, under the DPA terms, the Swiss Life entities agreed to accept responsibility for their criminal conduct and must “refrain from all future criminal conduct, enhance remedial measures, and continue to cooperate fully with further investigations into hidden insurance policies and related policy investment accounts.” If the entities abide by all the terms, the government will defer prosecution for three years and then seek to dismiss the charge.
The DPA does not include any requirement for Swiss Life to retain an independent compliance monitor.
The details: The offshore policies concealed by Swiss Life from the IRS included approximately 1,608 private placement life insurance (PPLI) policies and related accounts in banks around the world and the income generated in these accounts.
Beginning as early as 2008, “the PPLI carriers were aware that UBS and other Swiss banks were terminating or reevaluating their business relationships with U.S. clients in response to increasing offshore tax enforcement efforts by U.S. authorities,” the Justice Department stated. “Certain management and sales personnel within the Swiss Life PPLI Business Unit viewed these developments as a business opportunity to expand the PPLI business by onboarding U.S. clients who were fleeing UBS and other Swiss banks.”
“Members of management of the PPLI Business Unit knew about and authorized the onboarding of U.S. clients without regard to whether they were declared or undeclared,” the Justice Department added.
Swiss Life engaged in additional misconduct, including:
- Funding or terminating U.S.-related PPLI policies through asset transfers from/to an account maintained by a third party associated with the policyholder;
- Assisting U.S. taxpayers in establishing and maintaining PPLI policies in the name of a foreign relative with the effect of obscuring the U.S. nexus of the assets used to fund the policy or to repatriate the U.S. taxpayer’s undeclared assets through a sham death payout;
- Allowing policyholders to designate an authorized recipient to receive policy documents and custodian investment account statements, rather than having those documents sent directly to the policyholder; and
- Misusing corporate premium bank accounts as a transitory account to help conceal the movement of U.S. clients’ funds.
Compliance lessons: The $25.2 million penalty Swiss Life agreed to pay was discounted 50 percent for cooperation. The Justice Department said it considered Swiss Life “conducted a robust internal investigation; supplied client-related data; facilitated the acquisition by the Justice Department of information relating to custodian banks, asset managers, and other entities and individuals related to Switzerland, Liechtenstein, and Singapore; and otherwise meaningfully assisted the Department’s cross-border tax enforcement efforts.”
“In addition, Swiss Life conducted extensive outreach to current and former U.S. clients to confirm historical tax compliance, and to encourage disclosure to the IRS when policyholders’ historical tax compliance issues had not yet been resolved,” the Justice Department added. “Swiss Life further implemented remedial measures to protect against the use of its services for tax evasion in the future.”
The resolution with Swiss Life “sends an unequivocal message that offshore evasion is still a high priority of IRS Criminal Investigation,” stated James Lee, chief of IRS Criminal Investigation.
The Justice Department’s inquiry into Swiss Life began in September 2017 and concerned “legacy business” with U.S. clients, the company said in a statement.
“Swiss Life is now focused on fulfilling the requirements under the resolution and successfully concluding the DPA,” the company stated.