The Department of Justice today announced that two more banks—Bank Linth (Bank Linth) and Bank Sparhafen Zurich AG (BSZ)—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. Bank Linth will pay a $4.1 million penalty, and BSZ will pay a $1.8 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 signed today, 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.
Bank Linth Details
According to the Justice Department, Bank Linth’s 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. Bank Linth provided this assistance to U.S. clients in a variety of ways, including the following:
Opening and maintaining accounts in the names of sham entities;
Providing U.S. taxpayers with numbered accounts that hid the taxpayers’ identities;
Facilitating U.S. taxpayers’ withdrawal of cash from undeclared accounts; and
Agreeing to hold bank statements and other mail relating to accounts rather than sending them to U.S. taxpayers in the United States.
On several occasions, Bank Linth opened accounts for U.S. taxpayers through an external asset manager, and one of these accounts was opened in the name of a sham foundation. In that instance, Bank Linth knowingly accepted and included in account records forms provided by the directors of the 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.
BSZ Case Details
According to the Justice Department, U.S. persons opened 32 U.S.-related accounts at BSZ after Aug. 1, 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 BSZ knew or had reason to know that most of these accounts were likely not declared to the IRS. Moreover, 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 investigation.
Two relationship managers at BSZ were responsible for managing most of its U.S.-related accounts in the period since 2008, and one of those managers directly reported to BSZ’s chief executive officer. 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.
Until 2012, BSZ provided its U.S. clients with an option for hold-mail agreements, even though it understood that providing these agreements upon request could allow U.S. persons to keep evidence of their accounts outside of the United States in order to conceal assets and income from the IRS. One U.S. client told his BSZ relationship manager by email that the hold-mail fee was “cheap insurance against having my dealings with you come to the attention of the government revenue authorities.”
BSZ also offered travel cash cards to its clients, including U.S. persons. A client could instruct BSZ to load up to 10,000 Swiss francs, U.S. dollars or euros from his or her BSZ bank account onto a travel cash card. The client could then use the card for purchases or remit unused balances back to the BSZ account.
U.S. persons’ use of these cards facilitated access to or use of undeclared funds on deposit at BSZ. One BSZ relationship manager sent a brochure about travel cash cards to a U.S. client who did not wish to transfer money to the United States because of “surveillance” concerns.
Since Aug. 1, 2008, BSZ held 91 U.S.-related accounts, with over $25 million in assets.