US fines major Swiss bank for helping tax evasion

31 Mar 2015


The US Department of Justice (DOJ) has imposed a $211-million penalty on major Swiss bank BSI SA to avoid prosecution on charges related to helping its clients to evade US taxes.

Lugaon-based BSI, one of Switzerland's largest private banks, is the first one to reach resolution under the DOJ's 'Swiss bank program' launched in August 2013, which provides Swiss banks to resolve voluntarily potential criminal liabilities in the US related to undeclared US-related accounts.

The programme excluded more than a dozen Swiss banks that were already under criminal investigation.

BSI helped US clients create sham identities to facilitate tax evasion. The lender acknowledged that to help keep the secret, it issued credit or debit cards to many US clients without names visible on the card itself. The bank also admitted that it helped the clients to repatriate cash, the DOJ said in a statement.

BSI had more than 3,000 active accounts secretly tied to US taxpayers after 2008, many of which it knew were not disclosed to US authorities.

Apart from the fine, under a two-year deferred prosecution agreement, BSI agreed to make a complete disclosure of cross-border activities, assist prosecutors with all investigations related to the case and ensure that all new accounts would be declared to the US.

DOJ expects similar agreements in the "near future", said assistant attorney general Caroline Ciraolo.

"The programme offers a unique opportunity for Swiss banks to come forward voluntarily, admit to criminal conduct, pay an appropriate penalty, and assist the department in its investigations of other financial institutions, US account holders, and individuals who facilitated and profited from the concealment of foreign accounts by US taxpayers," Ciraolo said.

Swiss banking giant Credit Suisse was fined over $2.5 billion last year for helping its American clients evade taxes. (See: Credit Suisse pleads guilty to US tax evasion charges, fined over $2.5 billion).

Since 2009, the DOJ has charged more than 100 offshore bank account-holders, dozens of facilitators, and financial institutions. The investigations have gone beyond Switzerland expanding its focus on banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean.

The initiative has also netted more than $7 billion to the US treasury from individual taxpayers seeking to get into compliance.

In a statement, BSI said, ''By entering the non-prosecution agreement, BSI resolves its liability with the DOJ arising from its legacy US private banking cross-border business.''

BSI said that the $211-million settlement was recorded in its 2014 financial statements and it had a significant impact on the bank's net profit for the year which was 2.2 million Swiss francs.

The lender said that the agreement with the DOJ facilitates the completion of BSI's pending acquisition by Banco BTG Pactual SA subject to regulatory approvals. Last July, the Swiss bank's parent Italian insurance giant Generali group sold it to Brazilian investment bank Banco BTG Pactual for $1.7 billion.

According to Washington DC attorney Scott Mitchel, 60 or 70 other Swiss banks are expected to strike similar agreements with the DOJ in the coming months.

Swiss financial regulator FINMA said in a statement yesterday that BSI had breached its obligations to identify, limit and monitor risks involved in its dealings with US clients, having served a large volume of customers with undeclared assets.

FINMA hopes that each bank in the US programme will reach an agreement with the DOJ to settle their legacies related to US clients subject to US taxation.

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