Swiss Banks Struggle With Non-Prosecution Agreement

A little under a year ago there were more than 100 Swiss banks clawing their way into the U.S. Justice Department’s no prosecution agreement. The deadline to sign up was New Years’ Day 2014. Banks who were able to meet the deadline were guaranteed no conviction or closure, no disgrace, just a few penalties and a slap on the wrist. Fast forward 10 months, and now more than 70 of these banks are pushing back against the rigid deal, which includes a harsh non-prosecution agreement.

The U.S. has seen seemingly unending success in its pursuit of offshore accounts, with UBS having paid $780 million to the IRS alongside Credit Suisse’s guilty plea and $2.6 billion fine. In light of these successes, the Justice Department is demanding complete and ‘total cooperation’.

Swiss banks that fail to meet the mark face swift prosecution. The Justice Department hopes the fact that 14 Swiss banks under investigation were ineligible for the deal, including big names like Julius Baer, and Pictet & Cie, may encourage the 100 others to cooperate. However, the terms of the non-prosecution agreement weren’t available until recently, after the 100 banks signed on.

The banks were broken up into three categories. One category that has garnered significant attention is the category two banks. These banks have reason to believe they have committed tax offenses, and may be able to escape prosecution assuming they are able to detail their wrongdoing with U.S. clients and pay the appropriate fines. They will also be required to reveal all cross-border activities and close the accounts of Americans evading taxes.

Banks that held accounts on August 1, 2008 must pay a fine of 20% of the highest value of all non-disclosed accounts. That fine increases to 30% for any secret accounts created after August 1, 2008 but before March 2009. Accounts opened after that will be subject to a 50% penalty.

The relief being sought out by 73 of the 100 or so Swiss banks in the program couldn’t come sooner. The Swiss government doesn’t seem to have any interest in offering its support and while the banks are lawyered up and ready for a fight, the global landscape of transparency and disclosure is likely to hang around for quite some time.

Source: Wood, Robert, “73 of 100 Swiss Banks in Bed With The IRS Are Eyeing The Sofa,” Forbes, October 25th, 2014