US and Switzerland announce bank anti-tax evasion programme and penalties

The governments of Switzerland and the United States jointly announced a new programme encouraging Swiss banks to cooperate with the US Justice Department’s on-going investigation of the use of foreign banks to commit tax evasion. The programme is designed to allow all Swiss banks not already under criminal investigation to resolve issues with the US Justice Department and avoid prosecution.

While banks that participate in the programme can avoid prosecution, the programme will impose stiff penalties. Banks seeking a non-prosecution agreement must agree to a penalty in an amount equal to 20% of the maximum aggregate dollar value of all non-disclosed US accounts that the bank held on August 1st 2008. The penalty amount will be 30% for secret accounts opened after that date but before the end of February 2009. The penalty will be 50% for secret accounts opened after February 2009.

“This programme will significantly enhance the Justice Department’s on-going efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States,” said US Attorney General Eric Holder in a prepared statement.

Under the programme, participating Swiss banks will be required to:

• Agree to pay the penalties described above;
• 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;
• Co-operate in treaty requests for account information;
• Provide detailed information about other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed; and
• Agree to close accounts of account holders who fail to come into compliance with US reporting obligations.

Banks that meet all of these requirements will be eligible to enter into a non-prosecution agreement, under which the US Justice Department will not prosecute the bank for any tax-related offences under title 18 (federal crimes) or title 26 (Internal Revenue Code) of the US Code or for any unreported monetary transactions under title 31, sections 5314 or 5322, of the US Code.

Banks with a non-prosecution agreement will also be required to provide assistance and information to the US Justice Department as it pursues criminal or other proceedings and to close the accounts of recalcitrant account holders (as defined by the US Foreign Account Tax Compliance Act (FATCA)).

The programme will also allow Swiss banks that did not engage in wrongful acts with US taxpayers to resolve their status and receive a non-target letter. Most of these banks will be asked to provide an internal investigation report prepared by an independent examiner and any additional information requested by the US Justice Department. Some banks will be allowed to show that they met certain criteria for deemed-compliance under FATCA.

The US Justice Department says that since 2009, it has charged more than 30 banking professionals and 68 US account holders with violations arising from their offshore banking activities. Fifty-four US taxpayers and four bankers and financial advisers have pleaded guilty, and five taxpayers have been convicted at trial.

—Alistair Nevius (anevius@aicpa.org) is editor-in-chief, tax for CGMA Magazine.