DOJ Targets Swiss Banks for Offshore Tax Evasion


More deals between the Department of Justice and Swiss banks can be expected to resolve offshore tax evasion investigations before the end of the year, according to a report by Reuters.

In 2013, the Department of Justice offered to avoid criminal charges if Swiss banks came forward about their cross-border business involving U.S. account holders. BSI SA was the first bank to reach a deal with the Justice Department, agreeing to pay a $211 million penalty.

About a 100 Swiss banks signed up for the program before the deadline in December 2013. Although some have withdrawn their participation in the program, the Justice Department is hopeful that agreements will be reached with the other banks by the end of the year. The initial deadline for reaching deals with the banks was September 2014.

A significant number of them are expected to have a penalty smaller than the one paid by BSI. BSI helped thousands of clients hide assets from authorities for decades. The penalty is based on the value of assets in U.S. related counts, with higher penalties applying to accounts opened after the U.S. said it would pursue offshore banks for tax evasion in August 2008. BSI had 3,500 U.S. client accounts with $2.78 billion under management at its peak.

The program is not available to banks which were already the subject of criminal investigations. The Justice Department is investigating a dozen banks that were not eligible for program.

A whistleblower tip on offshore tax evasion by Bradley Birkenfeld led to a payment of more than $100 million under the IRS whistleblower program a few years ago. Birkenfeld’s report on UBS for helping U.S. clients use Swiss bank accounts to hide their assets from the Internal Revenue Service led to a fine of $780 million.

The U.S. has continued its pursuit since the UBS investigation. Last year, Credit Suisse paid $2.6 billion and plead guilty to one county of conspiring to aid tax evasion in order to resolve the allegations against the ban.

The United States is not the only country going after international tax fraud right now. France is currently pursuing HSBC in a criminal investigation for tax evasion and last week was ordered to provide bail of $1.1 billion (1 billion euros). Whistleblower Herve Falciani provided details about HSBC bank’s client accounts which he acquired as a former IT employee at the from in 2008. UBS, which has previously settled with the U.S. and Germany, has previously been required to post a $1.37 billion bond as a down payment on potential penalties from a French criminal investigation.

Tax evasion at HSBC has proven controversial for President Obama’s Attorney General nominee, Loretta Lynch. Lynch was part of a 2012 deal negotiating a resolution of the HSBC money laundering investigation. She has insisted that the deal does not protect the bank from tax evasion charges. An unnamed U.S. official told The Guardian that the U.S. is considering a criminal indictment of the bank.

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