The Tax Times: BSI Becomes the First Swiss Bank to Settle With Under the U.S. Swiss Bank OVDP Program.

The Department of Justice announced on March 30, 2015, that BSI SA, one of the 10 largest private banks in Switzerland, is the first bank to reach a resolution under the Department of Justice’s Swiss Bank Program.

In a deal with U.S. prosecutors, Swiss private bank BSI SA agreed to pay a $211 million penalty and hand over leads on more than 3,000 accounts with U.S. ties, as well as the actual names of an undisclosed, but presumably much smaller group of U.S. account owners.

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.”

Under the program, banks are required to:

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.

The “non-prosecution agreement,” which allows BSI to avoid criminal charges in the U.S., is the first to be sealed under a controversial amnesty program the U.S. Department of Justice announced in August 2013 for all Swiss banks, except the 14 already under criminal investigation.

At one point, BSI had 3,500 U.S. linked accounts

holding a total of $2.78 billion in assets.

BSI is part of the approximately 100 banks that signed up for the DoJ program available to banks not under criminal investigation for helping clients evade US taxes, which saved them from prosecution if they co-operated with authorities amid a broad tax crackdown. Under the program provisions, a bank must pay a penalty equal to 20 per cent of the total value of all non-disclosed US accounts held by the bank on August 1, 2008. The penalty amount gradually increases for secret accounts opened after that date.

BSI is accused of helping US clients create sham companies to hide the identity of account holders and of issuing credit or debit cards without names visible on the cards to hide client identities, the DoJ said. The bank also helped customers repatriate cash.

Fourteen other banks not eligible for the programme are facing DoJ criminal cases. They include HSBC, which is under renewed scrutiny after leaked documents related to its alleged efforts to help clients evade taxes were recently published by the media.

DoJ officials have defended the unprecedented Swiss program, saying the Swiss banks are providing leads that allow U.S. investigators to uncover where secret money has gone and to eventually (after a lot of back and forth with Swiss authorities) uncover the identities of some tax-cheating U.S. account holders.

The fact that most names won’t be revealed at first, gives customers of the bank time to apply to the IRS’ long running “offshore voluntary disclosure program,” it allows individuals with secret offshore accounts to avoid criminal prosecution in return for confessing and paying back taxes and a penalty equal to some percentage of the account’s maximum value, but tax cheats whose names the IRS already has aren’t eligible for that program.

Last August, the IRS increased the OVDP penalty to 50% of an account’s maximum value in those cases where the money was held at an institution that has been publicly identified as under investigation, as BSI now has.

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.

From the beginning of the Swiss Bank Program, the department has emphasized the importance of the banks’ helping to identify individuals who facilitate U.S. tax evasion and U.S. accountholders. BSI provided substantial assistance in this regard.

The department’s offshore enforcement efforts have reached far beyond Switzerland, as evidenced by publicly announced actions involving banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean.

While BSI’s U.S. accountholders who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS’s offshore voluntary disclosure programs, the price of such disclosure has increased. With today’s announcement of BSI’s non-prosecution agreement, its noncompliant U.S. accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the IRS’ program.

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