The Department of Justice this week announced that two more banks—Société Générale Private Banking (SGPB-Suisse) and Berner Kantonalbank (BEKB)—have reached a resolution under the Department’s Swiss Bank Program, which provides a means for Swiss banks to resolve potential criminal liabilities in the United States. Société Générale will pay a $17.8 million penalty, and Berner Kantonalbank will pay a $4.6 million penalty, in return 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. 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 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.
According to the terms of the NPAs, 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.
Société Générale Case Details
According to the Justice Department, SGPB-Suisse’s U.S. cross-border banking business aided and assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the IRS. SGBP-Suisse used a variety of means to assist U.S. clients in hiding their assets and income, including opening and maintaining accounts for U.S. taxpayers in the name of non-U.S. entities, including sham entities, thereby assisting such U.S. taxpayers in concealing their beneficial ownership of the accounts.
Such entities included Panama and British Virgin Island companies, as well as Liechtenstein foundations. In two instances, an SGPB-Suisse employee acted as a director of entities that had U.S. taxpayers as beneficial owners. In another instance, upon the death of the beneficial owner of an entity, the heirs opened accounts held by sham entities at SGPB-Suisse to receive their shares of the assets from the entity account.
SGPB-Suisse further provided numbered accounts, allowing the accountholder to replace his or her identity with a code name or number on documents sent to the client, and held statements and other mail at its offices in Switzerland, rather than sending them to the U.S. taxpayers in the United States. In addition to these services, SGPB-Suisse:
Processed requests from U.S. taxpayers for cash or gold withdrawals so as not to trigger any transaction reporting requirements;
Processed requests from U.S. taxpayers to transfer funds from U.S.-related accounts at SGPB-Suisse to accounts at subsidiaries in Lugano, Switzerland, and the Bahamas;
Opened accounts for U.S. taxpayers who had left UBS when the department was investigating that bank;
Processed requests from U.S. taxpayers to transfer assets from accounts being closed to other SGPB-Suisse accounts held by non-U.S. relatives and/or friends; and
Followed instructions from U.S. beneficial owners to transfer assets to corporate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus.
Since Aug. 1, 2008, SGPB-Suisse held and managed approximately 375 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $660 million.
BEKB Case Details
BEKB provided services that facilitated some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets in those accounts and related income. These services included opening and maintaining numbered accounts, allowing clients to use code names rather than full account numbers and providing hold mail services.
BEKB opened accounts for account holders who exited other Swiss banks and accepted deposits of funds from those banks. BEKB also processed standing orders from U.S. persons to transfer amounts under $10,000 from their U.S.-related accounts. In one instance, a relationship manager asked an accountholder, who was a dual Swiss-U.S. citizen living in the United States, about the Foreign Account Tax Compliance Act (FATCA) and voluntary disclosure. When the accountholder failed to execute FATCA-related documents, BEKB took steps to close the account. In connection with that closing, the accountholder withdrew $70,000 and approximately 500,000 Swiss francs in cash.
BEKB committed to full cooperation with the U.S. government throughout its participation in the Swiss Bank Program. As part of its cooperation, BEKB provided a list of the names and functions of 16 individuals who structured, operated or supervised its cross-border business.
These individuals served as the chairman of the board of directors, members of the executive board, regional managers, heads of departments or heads of divisions. BEKB additionally provided information concerning its relationship managers and external asset managers, and it described in detail the structure of its cross-border business with U.S. persons, including narrative descriptions of high-value U.S.-related accounts and U.S.-related accounts held by entities.
Since Aug. 1, 2008, BEKB held approximately 720 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $176.5 million.