Offshore enforcement update, part 2: Swiss banks and non-prosecution agreements

In the first part of this post, we began discussing how federal regulators use non-prosecution agreements (NPAs) and deferred prosecution agreements (DPAs) to resolve various legal compliance concerns. In the tax community, this has particularly been the case with offshore accounts.

Indeed, for nearly two years, the Tax Division of the Department of Justice (DOJ) has had a program for Swiss banks seeking to come into compliance with U.S. reporting requirements for foreign accounts. In this part of the post, we will update you on some of the recent developments in this area.

As we noted in our June 4 post, 2015 began with many Swiss banks trying to use the DOJ program to resolve concerns by U.S. authorities about tax evasion. In early June, the DOJ announced that two more Swiss banks had reached non-prosecution agreements.

These banks were Rothschild Bank AG, based in Zurich, and Banca Credinvest SA, in Logano (in the Italian-speaking part of Switzerland).

The penalties the two banks will pay to the DOJ under their NPA settlements are substantial. Banca Credinvest will pay more than $3 million. Rothschild will pay $11.5 million.

These penalties could have been much higher, however, without the non-prosecution agreements. The banks were able to mitigate their penalties by agreeing to help bring account holders who are U.S. taxpayers into compliance with offshore account obligations.

In our April 23 post, we discussed the tactics many Swiss banks are using to put pressure on U.S. taxpayers to make all required offshore disclosures. These tactics include sending letters with threats to tell U.S. authorities about unreported accounts.