The Tax Times: 2 More Swiss Banks Agree to Turn Over Names of US Depositors

On Wednesday, July 8, 2015 we posted More & More Swiss Banks Turn Over Names to the DOJ! Bring the Total to 27 Banks!" well make that 29 now.

Now the Department of Justice announced on July 9, 2015 that two banks, Banque Pasche SA and ARVEST Privatbank AG, have reached resolutions under the department’s Swiss Bank Program.

“Banque Pasche and ARVEST have provided detailed information regarding the ways in which Swiss banks helped U.S. taxpayers conceal foreign accounts and evade their U.S. tax obligations, including through the use of numbered and coded accounts and sham offshore entities.”

“The days of safely hiding behind shell corporations and numbered bank accounts are over,”

said Acting Assistant Attorney General Caroline D. Ciraolo

of the Department of Justice’s Tax Division.

“As each additional bank signs up under the Swiss Bank Program, More and More Information Is Flowing to the IRS Agents and Justice Department Prosecutors going after Illegally Concealed Offshore Accounts and the Financial Professionals

who help U.S. Taxpayers Hide Assets Abroad.”

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 (a/k/a Levers List);

· Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and

· Pay appropriate penalties.

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

Banque Pasche SA is headquartered in Geneva, Switzerland, and owns and controls a group of companies in various jurisdictions, including Monaco and the Bahamas. From at least August 2008 to August 2013, Banque Pasche assisted certain U.S. taxpayers in evading their U.S. taxes and filing obligations, filing false income tax returns with the IRS and hiding offshore assets from the IRS.

Banque Pasche offered a variety of traditional Swiss banking services that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS. For example, Banque Pasche offered hold mail service, as well as code name or numbered account services. These services allowed certain U.S. taxpayers to minimize the paper trail associated with their undeclared assets and income.

Banque Pasche also permitted certain U.S. taxpayers to open accounts held in the name of sham, conduit or nominee offshore structures where the U.S. taxpayer’s interest in the account was not reported to the IRS. With respect to these accounts, Banque Pasche would obtain from the entity’s directors an IRS Form W-8BEN (or equivalent bank document) that falsely declared that the beneficial owner was not a U.S. taxpayer. As of Dec. 31, 2008, Banque Pasche had U.S.-related accounts held by entities created in Panama or the British Virgin Islands with U.S. beneficial owners. The majority of these accounts had false IRS Forms W-8BEN in the file.

Banque Pasche also opened accounts for U.S. taxpayers who had left other Swiss banks that were being investigated by the department, including UBS and Credit Suisse. Banque Pasche knew or should have known that the beneficial owners of the majority of these accounts were attempting to evade U.S. tax and foreign account reporting requirements. Many of these accounts were held by Panamanian corporations with U.S. beneficial owners. Some of these accounts were managed by a particular Geneva-based attorney who held a power of attorney over them. When these accounts were subsequently closed, the assets were transferred to banks located in Israel and Hong Kong in an attempt to further escape detection from U.S. authorities.

Banque Pasche has fully cooperated with the department during its participation in the Swiss Bank Program. For example, it described in detail the structure of its business with U.S. persons, which included the policies concerning U.S. accountholders. Banque Pasche also provided the names of members of its management committee and information about its relationships with external asset managers.

Since Aug. 1, 2008, Banque Pasche had 186 U.S.-related accounts, as defined under the Swiss Bank Program, with an aggregate maximum balance of approximately $655 million. Of these 186 accounts, 110 had U.S. beneficial owners and an aggregate maximum balance of approximately $111 million. Banque Pasche will pay a penalty of $7.229 million.

ARVEST Privatbank AG was a private bank headquartered in Pfaffikon, Switzerland. It provided portfolio management and related private banking services primarily to high net worth clients. On April 15, 2015, it ceased being a licensed Swiss bank.

ARVEST opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the IRS or the U.S. Department of the Treasury, as required by U.S. law. The bank helped clients set up entities, including trusts and foundations, in Liechtenstein, St. Kitts and other jurisdictions, with bank representatives serving as officers of certain of these entities, and opened ARVEST accounts in the names of these entities.

For several U.S. customers, ARVEST gave the accountholders a travel debit card, which did not have a name imprinted on the card. These cards were tied to accounts that the accountholders held in their names at a third-party Swiss Bank specializing in this service.

Since Aug. 1, 2008, ARVEST had 52 U.S.-related accounts, with a maximum aggregate asset value of over $134 million. ARVEST will pay a penalty of $1.044 million.

Most U.S. 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 Aug. 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 today’s announcement of these non-prosecution agreements, noncompliant U.S. accountholders at these banks must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

In accordance with the terms of the Swiss Bank Program, both of these Swiss Banks were able to mitigated their penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. While U.S. accountholders at Banque Pasche SA & ARVEST Privatbank AG 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.

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