Published On: Mon, May 18th, 2015

Another offshore bank reaches resolution with US Department of Justice

DeptJusticeWASHINGTON, USA -- Another offshore bank, Finter Bank Zurich AG (Finter), located in Zurich, Switzerland, has reached a resolution under the US Justice Department’s so called Swiss Bank Program.

The Swiss Bank Program, which was announced on August 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States. Swiss banks eligible to enter the program were required to advise the department by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared US-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 required to:

• Make a complete disclosure of their cross-border activities;

• Provide detailed information on an account-by-account basis for accounts in which US 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 US reporting obligations; and

• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreement signed on Friday, Finter agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared US accounts and pay a $5.414 million penalty in return for the department’s agreement not to prosecute Finter for tax-related criminal offenses.

Finter was founded in 1958 in Chiasso, Switzerland, and has a branch office in Lugano, Switzerland. Since August 1, 2008, Finter has maintained 283 US-related accounts with an aggregate maximum balance of approximately $235 million.

Since its establishment and continuing through at least October 2011, Finter, through its managers, employees and others, aided and assisted US clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the Internal Revenue Service (IRS).

After August 2008, when Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by US tax authorities, Finter accepted accounts from US persons exiting other Swiss banks.

Finter provided services that allowed US clients to eliminate the paper trail associated with the undeclared assets and income, including “hold mail” services and numbered and coded accounts. In addition, Finter assisted clients in using sham entities as nominee beneficial owners of undeclared accounts, solicited Forms W-8BEN that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts, and provided cash cards and credits cards linked to the undeclared accounts.

In resolving its criminal liabilities under the program, Finter encouraged US accountholders to come into tax compliance and participate in the IRS Offshore Voluntary Disclosure Program. While Finter’s US accountholders who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most US taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.

On August 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.

With Friday’s announcement of Finter’s non-prosecution agreement, its noncompliant US accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

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