Rothschild Bank AG and Banca Credinvest SA are the two latest Swiss Banks to settle with U.S. authorities as part of the Department of Justice's ongoing Swiss Bank Program. In exchange for non-prosecution agreements, the banks will pay fines and turn over detailed information about their American clients.
Rothschild was one of several Swiss banks to sign up American clients who were fleeing UBS, after UBS came under criminal investigation. Rothschild had 332 American clients with balances totaling about $1.5 billion. Many of these accounts were held in the names of entities created in Panama, Liechtenstein, the Cayman Islands, or other foreign entities. Despite knowing that the beneficial owners were U.S. persons, the bank obtained false declarations to the contrary. The bank offered numbered accounts and held all mail correspondence at the bank, to offer additional secrecy. Rothschild will pay a penalty of $11.5 million.
Banca Credinvest SA, based in Lugano, is a relatively young bank, becoming fully licensed in 2005. In late 2008, the bank took 11 American clients who had fled UBS. In total, the bank had 31 American account-holders with total balances of $24 million. The bank has agreed to pay a penalty of $3 million.
U.S. authorities have indicated that they expect to reach settlement agreements with the remaining banks that have come forward under the Swiss Bank Program by the end of the year. Just a week ago, the Department of Justice announced that agreements had been reached with four other banks: Societe Generale Private Banking; MediBank AG; LBBW AG; and Scobag Privatbank AG.
In accordance with the terms of the Swiss Bank Program, each bank has encouraged its American clients to voluntarily come into compliance with their U.S. reporting obligations. For now, individuals with accounts at these banks are still eligible for the Offshore Voluntary Disclosure Program (OVDP), but the banks have been placed on the list of Foreign Financial Institutions or Facilitators subject to the increased 50% offshore penalty, rather than the standard 27.5%.
Individuals with accounts at these institutions may still be eligible for the Streamlined Filing Compliance Procedures, which has a much lower 5% penalty, provided they can establish that their conduct was non-willful. However, one should consult with an experienced tax attorney before making the decision to do this, as it does not offer immunity from criminal prosecution like the OVDP.