Two More Banks Reach Non Prosecution Agreements With U.S. Government

Two More Banks Reach Non Prosecution Agreements With U.S. Government

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On Tuesday, June 9, 2015, the Department of Justice announced that two more banks had reached non prosecution agreements under the department’s Swiss Bank Program: Société Générale Private Banking (Suisse) SA (SGPB-Suisse) and Berner Kantonalbank AG (BEKB).

According to the terms of the agreements, each bank has agreed “to cooperate in any related criminal or civil proceedings, demonstrate that it has implemented internal controls to stop misconduct involving unreported U.S. accounts, and pay penalties.” In exchange, the Department of Justice agrees not to prosecute these banks for tax-related criminal offenses.

Pursuant to the terms of the Swiss Bank Program, each bank must encourage its U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.

With respect to Société Générale Private Banking, the press release reports the following:

SGPB-Suisse has had a presence in Switzerland since 1926, and had a U.S.-licensed representative office in Miami from the early 1990s until it closed on Aug. 26, 2013.  SGPB-Suisse opened and maintained accounts for accountholders who had U.S. tax reporting obligations, and was aware that U.S. taxpayers had a legal duty to report to the Internal Revenue Service (IRS) and pay taxes on all of their income, including income earned in SGPB-Suisse accounts.  SGPB-Suisse knew that it was likely that certain U.S. taxpayers who maintained accounts at the bank were not complying with their U.S. income tax obligations.

SGPB-Suisse’s U.S. cross-border banking business aided and assisted some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income the clients held in their accounts from the IRS.  SGBP-Suisse used a variety of means to assist U.S. clients in hiding their assets and income, including opening and maintaining accounts for U.S. taxpayers in the name of non-U.S. entities, including sham entities, thereby assisting such U.S. taxpayers in concealing their beneficial ownership of the accounts.  Such entities included Panama and British Virgin Island corporations, as well as Liechtenstein foundations.  In two instances, an SGPB-Suisse employee acted as a director of entities that had U.S. taxpayers as beneficial owners.  In another instance, upon the death of the beneficial owner of an entity, the heirs opened accounts held by sham entities at SGPB-Suisse to receive their shares of the assets from the entity account.

SGPB-Suisse further provided numbered accounts, allowing the accountholder to replace his or her identity with a code name or number on documents sent to the client, and held statements and other mail at its offices in Switzerland, rather than sending them to the U.S. taxpayers in the United States.  In addition to these services, SGPB-Suisse:

Processed requests from U.S. taxpayers for cash or gold withdrawals so as not to trigger any transaction reporting requireents;

Processed requests from U.S. taxpayers to transfer funds from U.S.-related accounts at SGPB-Suisse to accounts at subsidiaries in Lugano, Switzerland, and the Bahamas;

Opened accounts for U.S. taxpayers who had left UBS when the department was investigating that bank;

Processed requests from U.S. taxpayers to transfer assets from accounts being closed to other SGPB-Suisse accounts held by non-U.S. relatives and/or friends; and

Followed instructions from U.S. beneficial owners to transfer assets to corporate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus.

Throughout its participation in the Swiss Bank Program, SGPB-Suisse committed to full cooperation with the U.S. government.  For example, SGPB-Suisse described in detail the structure of its U.S. cross-border business, including providing a list of the names and functions of individuals who structured, operated or supervised the cross-border business at SGPB-Suisse; a summary of U.S.-related accounts by assets under management; written narrative summaries of 98 U.S.-related accounts; and the circumstances surrounding the closure of relevant accounts holding cash or gold.  SGPB-Suisse also provided information to make treaty requests to the Swiss competent authority for U.S. client account records.

Since Aug. 1, 2008, SGPB-Suisse held and managed approximately 375 U.S.-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $660 million.  SGPB-Suisse will pay a penalty of $17.807 million.

With respect to Berner Kantonalbank AG (BEKB), the press release reports the following:

BEKB was founded in 1834 as Kantonalbank von Bern, the first Swiss cantonal bank.  BEKB is based in the Canton of Bern and presently has 73 branches in Switzerland.  BEKB knew or had reason to know that it was likely that some U.S. taxpayers who maintained accounts at BEKB were not complying with their U.S. reporting obligations.  BEKB opened, serviced and profited from accounts for U.S. clients who were not complying with their income tax obligations.

BEKB provided services that facilitated some U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets in those accounts and related income.  These services included opening and maintaining numbered accounts, allowing clients to use code names rather than full account numbers and providing hold mail services.  BEKB opened accounts for account holders who exited other Swiss banks and accepted deposits of funds from those banks.  BEKB also processed standing orders from U.S. persons to transfer amounts under $10,000 from their U.S.-related accounts.  In one instance, a relationship manager asked an accountholder, who was a dual Swiss-U.S. citizen living in the United States, about the Foreign Account Tax Compliance Act (FATCA) and voluntary disclosure.  When the accountholder failed to execute FATCA-related documents, BEKB took steps to close the account.  In connection with that closing, the accountholder withdrew $70,000 and approximately 500,000 Swiss francs in cash.

BEKB committed to full cooperation with the U.S. government throughout its participation in the Swiss Bank Program.  As part of its cooperation, BEKB provided a list of the names and functions of 16 individuals who structured, operated or supervised its cross-border business.  These individuals served as the chairman of the board of directors, members of the executive board, regional managers, heads of departments or heads of divisions.  BEKB additionally provided information concerning its relationship managers and external asset managers, and it described in detail the structure of its cross-border business with U.S. persons, including narrative descriptions of high-value U.S.-related accounts and U.S.-related accounts held by entities.

Since Aug. 1, 2008, BEKB held approximately 720 U.S.-related accounts, which included both undeclared and not undeclared accounts, with total assets of approximately $176.5 million.  BEKB will pay a penalty of $4.619 million.

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