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Disclosure of Swiss bank secrets leading US to tax cases in Singapore, Israel

A man walks past a logo of Swiss bank UBS in Zurich Jul 27, 2015. At a rate of one or two a week, Swiss banks are doing what was once unthinkable: revealing to the world how they helped wealthy Americans cheat on their taxes.

[GENEVA] At a rate of one or two a week, Swiss banks are doing what was once unthinkable: revealing to the world how they helped wealthy Americans cheat on their taxes.

Once bastions of secrecy, 41 Swiss banks signed amnesty agreements this year with the US Justice Department that required disclosing the tricks they used to help customers hide assets, naming bankers and middlemen who enabled them and detailing the flow of untaxed money. They've also prodded thousands of reluctant Americans to disclose accounts hidden from the Internal Revenue Service.

The flood of information is now giving US investigators intelligence to try to build new cases against individuals and institutions in other countries, said Caroline Ciraolo, the Justice Department's top tax prosecutor.

Financial institutions in Singapore and Israel are possible targets, according to lawyers and prosecutors. "The money is moving out of Switzerland to a variety of jurisdictions," said Ms Ciraolo, an acting assistant attorney general. "We're following leads and following the money, wherever that leads us." The Swiss amnesty programme is part of a tax evasion crackdown that grew after 2009 when Switzerland's biggest bank, UBS paid US$780 million to avoid prosecution, and the US began criminal investigations of 14 other banks, including Credit Suisse.

Broadening the push, the US in 2013 offered to forgo prosecuting any Swiss bank that came clean on tax-evasion tactics. So far this year, the 41 banks paid combined penalties of US$354.5 million, with BSI SA paying the lion's share, or US$211 million. Another 40 or so banks may reach non-prosecution agreements this year, according to lawyers representing banks, as the amnesty program winds down. That will free investigators to turn to probing banks in other countries.

US agents interviewed taxpayers who used a Singapore money management firm to hide assets from the IRS, said Bryan Skarlatos and Scott Michel, lawyers who separately represent some of those Americans. They wouldn't identify the firm, and Ms Ciraolo wouldn't discuss it. "Certainly, Singapore would be one of the jurisdictions that we're looking at," Ms Ciraolo said.

Societe Generale's Swiss private banking unit admitted in its settlement that it transferred assets of US customers to "corporate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus", according to its statement of facts. The unit paid a US$17.8 million fine. A bank spokesman declined to comment.

In its settlement document, Banque Pasche said that client money was transferred to banks located in Israel and Hong Kong "in an attempt to further escape detection. An e-mail and phone call to the bank weren't returned.

Israeli banks have drawn special focus from the Justice Department. Last year then-Deputy Attorney General James M Cole cited "an ongoing and extensive investigation" into hidden bank accounts in Israel. Bank Leumi Le-Israel Ltd agreed to pay US$400 million to resolve its criminal case.

The data coming directly from Swiss banks are supplementing a separate trove the IRS gathered from 50,000 US taxpayers who disclosed their offshore accounts and paid US$7 billion in back taxes, fines and penalties since 2009.

The 41 non-prosecution agreements, posted on the Justice Department's website, provide insight into tax-evasion tactics used by bankers in Switzerland, where it's been a crime since 1934 to disclose client data. They opened numbered accounts to hide the true owners, held mail to avoid paper trails and let clients access their secret accounts through credit cards, a review of the amnesty statements shows. Banks also helped clients make cash withdrawals to avoid US currency reporting requirements, or converted assets to gold held in safe deposit boxes.

Many clients disguised their money in entities set up in tax havens outside of Switzerland. Of 41 banks that settled, 18 held assets in corporations, foundations or trusts in Liechtenstein; 15 in Panama; 11 in the British Virgin Islands, and four in Hong Kong.

Mr Michel, whose firm Caplin & Drysdale represents both banks and customers, said the "creative component" of the amnesty programme was to deputize banks to police current and former account holders. It also placed a "huge burden" on banks to produce information about employees and intermediaries who aided tax evasion, said Thierry Boitelle, a lawyer at Bonnard Lawson in Geneva." The DOJ is getting some very valuable information served up on a silver platter," Mr Boitelle said.