The Tax Times: 10 Swiss Banks Withdraw From US DOJ's Program

According to Swiss newspaper NZZ am Sonntag, quoting unnamed sources, 10 Swiss Banks that requested the US Department of Justice's non-prosecution program have now withdrawn from it because they have decided they did not systematically break US tax laws (Lets see if DOJ agrees with them?).

The agreement entails paying a large fine and disclosing client information to the US DOJ. On January 28, 2014 we posted "Offshore Swiss Bank Account? This May Be Your Last Chance To File A Voluntary Disclosure!" where we discussed that the United States Justice Department had received 106 Requests from Swiss Entities to participate in a settlement program aimed at ending a long-running probe of tax-dodging by Americans using Swiss bank accounts according to a senior US official. The 106 Swiss banks came forward at the end of last year to work with U.S. authorities in a program brokered by the Swiss government to help the banks make amends for aiding US Tax Evasion.

Liechtenstein-based VP Bank came forward to say it had concluded that it no longer needed to take part in the program.

Barclays Plc’s Swiss unit said it withdrew from the program after an internal review of client accounts.

The Remaining 96 Swiss Banks

Need To Persuade Their Clients To Come Clean!

As we posted on August 7, 2014, "Swiss banks have sent US client data to the IRS" where we discussed that June 30 was the deadline for turning over information on Americans considered in breach of U.S. tax rules. August 1, 2014 marks the end of the second wave of deliveries and includes documents that show which American clients were compliant.

Having met the August 1, 2014 deadline, some smaller banks will take a break from assembling reams of documents. For larger companies such as Cie. Lombard, Odier SCA, Geneva’s oldest bank, and Rothschild Bank AG of Zurich, as well as for some regional lenders including Aargauische Kantonalbank, the work will continue throughout the summer as they try to reduce possible fines by persuading clients to come clean directly to U.S. authorities.

“There’s a HUGE amount
of Information Flowing to the US ... from Swiss Banks ...,”

said Jay Rubinstein, a lawyer with Withers LLP in Geneva...

It all helps the Justice Department and

the IRS Build Their Cases.”

Client Names

Swiss law forbids the transfer of client names to foreign governments, unless requests for information conform to criteria set out in tax treaties. But banks can send other information to complement what the U.S. government gleaned from over 43,000 voluntary disclosures by American taxpayers.

Category 2 banks must disclose:

1. the total number of U.S. accounts since 2008,

2. their highest dollar value and

3. the employees who managed them,

in documents verified by an independent examiner, according to a joint Swiss-U.S. government statement announcing the program last August.

Secrecy Waivers

Some banks will try to mitigate penalties by providing documents to the Justice Department by Sept.ember 15, 2014 to support their claims that they encouraged clients to disclose accounts to the IRS through its offshore voluntary disclosure program.

"In some cases they’re providing the

Names of Account Holders through a

purported exception to Swiss Banking Secrecy

or Pursuant to a Valid Request"

and "Banks are breathing down their clients’ necks to encourage them into an accepted IRS voluntary disclosure program,” according to Milan Patel, a U.S. tax lawyer with Anaford AG in Zurich.

“Some banks are being Very Creative about what constitutes a Waiver of Secrecy Privileges in order to turn over The Account Holder Name to the Justice Department to reduce Their Penalties..."

Penalty Formula

Fines will based in part on a formula applied to the amount of non-disclosed U.S. assets at the bank. To gain non-prosecution deals, banks must pay:

·         20 percent of the value of accounts not disclosed to the IRS on Aug. 1, 2008,
·         30 percent for such accounts opened between then and February 2009 and
·         50 percent for accounts opened afterward.

Thus US taxpayers who have used a Swiss bank accounts may now want to consider applying for the US Offshore Voluntary Disclosure Program (OVDP), which sets a limit to the penalties imposed on them by the Internal Revenue Service (IRS) for failing to declare foreign assets and earnings.

However, once the Swiss banks disclosed an account holder's name to the IRS, OVDP election is no longer available to that account holder.

The US Can Use Swiss Data
for US Enforcement Actions!

The new agreement makes clear that: “Personal Data provided by the Swiss Banks… Will be Used and Disclosed only for purposes of Law Enforcement (which may include regulatory action) in the United States or as otherwise permitted by US law.”

Have Un-Reported Income From a Swiss Bank?