Wednesday, November 5, 2014

73% of Swiss Banks Want Changes to Their the Terms of the Anti-Tax Evasion Agreement - Non-Prosecution Agreements!

The U.S. Department of Justice (“DOJ“) and the Swiss Federal Department of Finance have entered into an agreement that essentially ends Swiss bank secrecy and the renown of Switzerland as a tax haven (the “PFSB“).
The PFSB is monumental because it:

  1. Applies not just to American taxpayers but also to foreigners and foreign entities who maintain Swiss bank accounts if they are U.S. tax obliged persons under FATCA;
  2. Requires the disclosure of essentially every penny transferred in and out of closed Swiss bank accounts over the last five years by persons and entities who are caught by the PFSB, wherever situated. As a result, U.S. law enforcement will be able to follow the flow of funds to pursue tax evasion by learning from where, and to where, funds were transferred; and
  3. Requires the disclosure of professionals affiliated with the bank accounts or who acted as intermediaries in respect of the accounts.
In the last few years, 4 lawyers, 5 asset managers, 1 trust advisor and 21 bankers have been indicted by the U.S. in connection with the use of Swiss bank accounts – the disclosure of this information means more indictments of advisors are forthcoming.

However, see our post entitled Ex-UBS Exec & Ex-Mizrahi Banker Found Not Guilty In Tax Evasion Trials!" where we discuss that jurors recently found former UBS AG executive Raoul Weil not guilty of conspiracy to defraud the United States and jurors acquitted a retired senior vice president at Israeli-based Mizrahi Tefahot Bank Ltd. in Los Angeles federal court on charges he helped U.S. customers conceal their assets from the Internal Revenue Service.

The objective of the PFSB is to:
  1. Flush out Tax Evaders (and secure the payment of unpaid taxes and penalties by them to the IRS);
  2. Flush out their Advisors and prosecute them, including lawyers and asset managers, ect.
  3. Bring about the end of the use of foreign banks in tax havens for tax evasion for all U.S. tax obliged persons and entities and
  4. Secure the payment to the U.S. of billions of dollars in penalties from Swiss and other banks worldwide in settlement of non-prosecution.
By virtue of its reference to the U.S. Foreign Account Tax Compliance Act, 124 Stat. 97-117 (“FATCA“), the PFSB applies not just to American natural and legal persons but also to foreigners and foreign legal persons in the same circumstances in which FATCA applies (“U.S. Tax Obliged Persons"). Due to its breadth, FATCA impacts virtually all non-U.S. entities, directly or indirectly, receiving most types of U.S. source income, including gross proceeds from the sale or disposition of U.S. property which can produce interest or dividends.

The Swiss Bank must also agree to 
Provide Expert Testimony for 
U.S. Criminal Prosecutions 

that will arise from the disclosure of information provided to the U.S. under the Agreement for charges that may include tax evasion and money laundering.

The third stage, after entering into a NPA, the bank must provide additional information on the names and details of holders of closed U.S. Related Accounts. That disclosure includes the following:
  • Dollar value of each U.S. Related Account;
  • Name of U.S. Related Account holders and whether held by legal or natural persons;
  • Beneficial interest information;
  • Whether U.S. securities were held, and details in respect thereof;
  • Names of lawyers, fiduciaries, asset managers, accountants, financial advisers, trustees, nominees, and anyone else affiliated with the U.S. Related Accounts;
  • Details on the transfer of funds into and out of the U.S. Related Accounts on a monthly basis, including where such funds were deposited to and from and whether an intermediary was involved (such as lawyers, trustees and other third parties, and if so, their names); and
  • Names of financial institutions involved in the transfers of funds, wherever situated worldwide.
    The information provided to the U.S. by Swiss banks must be certified by an independent lawyer (or accountant) to provide comfort to U.S. authorities that the information received by Swiss banks constitutes full disclosure.
    The PFSB does not apply to approximately 14 Swiss banks that are currently the subject of U.S. criminal investigation in respect of bank secrecy and tax evasion.
The Agreement is called Program for Non-Prosectuion Agreement or Non-Target Letters for Swiss Banks.

Now according to Forbes, 73 of the 100 Swiss Banks are having second thoughts and  want a better deal.Over 100 Swiss banks rushed before New Years’ Day 2014 to sign up for the U.S. Justice Department deal that would mean no prosecution. No conviction or closure, no disgrace, just some penalties and life goes on. But ten months later, over 70 of these banks are pushing back against the harsh deal, which includes a tough non-prosecution agreement.

Since 2009, the U.S. has had unprecedented success with ferreting out offshore accounts. UBS paid $780 million to the IRS and recently, Credit Suisse plead guilty and paid a $2.6 billion fine.

From its position of dominance, the Justice Department seeks ‘total cooperation’. American names, details, and more. The consequences of the Swiss not complying?

Prosecution. The fact that 14 Swiss banks under investigation were ineligible for the deal, including Julius Baer, and Pictet & Cie, may have helped entice 100 others. But the terms of the non-prosecution agreement were not available until now, 10 months after 100 banks signed on.The U.S. settlement deal broke Swiss banks into several categories, with more serious penalties for the worst offenders.
Lawyers representing 73 of the banks have sent a letter to the USDoJ complaining that the latest version of the amnesty terms, circulated on 22 September, includes new demands that were not in the original agreement.
  • Participating banks are now required to 'cooperate fully with any other domestic or foreign law enforcement agency in any investigation, and to 'share material with governments other than the US.
  • It also insists that banks must disclose information about their parent companies.
The banks' letter of protest says these terms go beyond what they anticipated when signing up, and urges that they are withdrawn. The requirement to cooperate with foreign governments 'turns a programme specifically focused on US tax issues into a global cooperation agreement without any safeguards or guarantees of appropriate consideration of the banks' cooperation', according to the 11-page letter, which is signed by 18 law firms representing the banks.

They may get a modicum of relief, but the landscape of global transparency and disclosure isn’t likely to materially change. 
Have Un-Reported Income From an Offshore Bank?

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