Swiss bank BSI SA has admitted to helping U.S. clients evade taxes and entered into a non-prosecution agreement with the U.S. Department of Justice, in a deal that requires the bank to pay a $211 million penalty and turn over the names of 3,000 American account holders. They are the first of more than 100 Swiss Banks to officially enter into a non-prosecution agreement.
Since the U.S. started its ongoing clampdown on offshore tax evasion in 2008, several Swiss banks have been prosecuted in the United States. Notable examples include Wegelin & Co., which pleaded guilty to criminal charges and shut its doors in 2013, and Credit Suisse, which pleaded guilty to criminal charges last year.
In 2013, U.S. authorities announced a program to encourage Swiss banks to cooperate with the Justice Department's investigation into the use of offshore accounts to commit tax evasion, with the program being open to all Swiss banks not already under investigation. More than 100 Swiss banks took the U.S. up on the offer, which requires that the banks agree to pay substantial penalties, make complete disclosures of their cross-border activities, and cooperate in treaty requests for account information. Banks that meet the requirements of the program are eligible for non-prosecution agreements.
BSI admits that it helped U.S. taxpayers hide offshore accounts by setting up shell entities in places like Panama, Liechtenstein, and the Bahamas. These taxpayers failed to disclose their accounts to the IRS or to pay taxes any of the related income. For a fee, BSI offered to hold bank statements, rather than mailing them to addresses in the United States. Clients also communicated with the bank in code, telling their bankers their "gas tank is running empty" when they needed more cash on their debit cards.
We expect to see many more non-prosecution agreements coming out in the coming months, as part of this program for Swiss banks. Americans who still have undisclosed foreign accounts, whether in Switzerland or elsewhere, are encouraged to come forward as soon as possible under one of the ongoing IRS compliance programs. Those who do not come forward voluntarily face the risk of substantial civil penalties and criminal prosecution.