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Deutsche Bank Joins U.S. DoJ’s Self-Reporting Program

October 22, 2014


Deutsche Bank AG’s Swiss unit has entered a U.S. Justice Department self-reporting program for banks that believe they may have aided Americans in the evasion of taxes.

Under the program, Deutsche Bank’s Swiss operation has the ability to escape prosecution by disclosing previously undeclared U.S. accounts. While the bank may still face penalties equal to as much as half of the amount of hidden funds held for U.S. clients, the program allows participants to negotiate with the Justice Department for a less severe financial penalty.

The Swiss units of global banking giants Morgan Stanley and Goldman Sachs Group Inc. have also entered the program alongside dozens of other Swiss banks.

Deutsche Bank’s Swiss business has around 13,000 clients in total, with a significant number of those clients being U.S. residents.

Efforts on behalf of U.S. authorities to squeeze information regarding undisclosed accounts from banks in Switzerland has continued to increase as global pressure and regulatory scrutiny towards banks escalates. Several of the world’s largest banks, including Deutsche Bank, are caught in the middle of international probes into efforts to rig interest rates and the alleged manipulation of currencies.

An examination by the Federal Reserve Bank of New York last year found Deutsche Bank’s U.S. operations were far from acceptable in regards to the bank’s financial reporting requirements.

Swiss banks that have chosen to participate in the Justice Department’s self-reporting program have found the process rather difficult, according to people familiar with the matter. In order for a bank’s penalty to be reduced they must try to get current and former clients to waive their right to privacy under Swiss law. This then allows the bank to identify those clients to U.S. authorities. Amounts voluntarily disclosed by these clients can be subtracted from a bank’s penalty.

“While denying a financial institution’s request to disclose personal identifying information may seem like the most appealing option for Americans with foreign accounts, a client’s unwillingness to cooperate with his or her bank is likely to be seen by prosecutors as a red flag,” says Catherine Rude, an international tax attorney in Fort Worth.

Source: Letzing, John, & Henning, Eyk, “Deutsche Bank to Aid U.S. Justice Department in Swiss Tax Evasion Probe,” The Wall Street Journal, October 9th, 2014

Offshore Accounts/International Tax Disputes