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[NEWARK] After three years and US$1.37 billion in penalties, the US is ending a disclosure programme that forced Swiss banks to reveal all the secret ways they helped Americans evade taxes.
A final accord announced on Wednesday, the 78th by the US with 80 Swiss banks, clears the way for prosecution of other firms excluded from the program. Julius Baer Group Ltd said last month that it expects to pay about US$547 million to settle a separate US criminal investigation into how it assisted American tax cheats.
In the final agreement, HSZH Verwaltungs AG avoided prosecution by agreeing to pay US$49.8 million and admitting it helped US clients dupe the Internal Revenue Service, the Justice Department said.
"Through this initiative, we have uncovered those who help facilitate evasion schemes and those who hide funds in secret offshore accounts," Attorney General Loretta Lynch said in a statement. "We have improved our ability to return tax dollars to the US And we have pursued investigations into banks and individuals."
The US reached non-prosecution agreements through the disclosure program with dozens of banks since securing US$211 million from BSI SA last March.
More deals followed in December when Credit Agricole SA agreed to pay US$99.2 million; Bank Lombard Odier & Co US$99.8 million; and Bank J. Safra Sarasin AG US$85.8 million. Union Bancaire Privee settled for almost US$188 million on Jan 6.
In all, the banks held about US$50 billion in US assets in 35,096 accounts from 2008 to 2013, according to data compiled by Bloomberg. The total penalties amounted to 2.7 per cent of those assets.
"The program has been very tough for the banks in Switzerland, but after the settlement they are able to look ahead," Daniela Flueckiger, a spokeswoman for the Basel, Switzerland-based Swiss Bankers Association, said in an e-mail.
Beat Werder, a spokesman for Switzerland's State Secretariat for International Financial Matters, welcomed the fact that the tax disputes were resolved with banks "in accordance with Switzerland's legal system and sovereignty." 'TREATED FAIRLY'
"In particular, the transfer of client data is not permitted," Mr Werder said in an e-mail. "Switzerland is in regular contact with the DOJ, working towards ensuring that Swiss banks are treated fairly and are not disadvantaged relative to US or other banks. Such contact also makes it possible to call for compliance with the Swiss legal system."
Banks used an array of ruses to help clients hide assets. All but three held mail to reduce a paper trail, and most offered numbered accounts that concealed identities. Dozens helped clients withdraw untraceable cash, and the vast majority paid external asset managers to bring in clients.
US clients also used offshore corporations, trusts and foundations titled in the names of others to cheat the IRS. Panama was cited in 41 of the accords, followed by Liechtenstein at 39 and the British Virgin Islands at 38. Hong Kong and the Cayman Islands were each cited in 10 of the accords.
One tactic described in 23 accords was banks offering life insurance policies that held a client's accounts in the name of the insurer. Such insurance "wrappers" disguised the true owners of accounts.
Another 18 accords describe how banks helped clients hold assets in untraceable gold or other precious metals.
HSZH admitted in a statement of facts that it targeted US clients who were leaving other Swiss banks that were under investigation by the Justice Department, particularly UBS Group AG, Switzerland's largest bank. HSZH viewed those clients "as a business opportunity to be seized immediately rather than a warning to be heeded," according to the statement.
The firm's bankers also regularly visited clients in the US, delivering cash in amounts below US$10,000 to avoid triggering reporting requirements, HSZH said in the statement.
One client with more than US$90 million in an account held by a Liechtenstein foundation got cash deliveries from an HSZH banker at a Swiss hotel or in London, according to the statement. Another US couple with US$24 million incrementally took out more than 19 million Swiss francs (S$26.8 million) in cash and 55kg in gold bars, worth more than 3 million Swiss francs, when they closed an account in 2012.
HSZH's senior managers also approved two pipelines to 83 US clients with undeclared accounts, most of whom left UBS, according to the statement. One top executive sent an e-mail in 2008 saying that discussions of such clients should be verbal and not written.
"The last thing we need is a 'paper trail' + 'broadcast' throughout" the organization, the executive wrote, according to the statement of facts.
Most of the accounts were managed by an external asset manager who was indicted in Florida in 2009, according to the indictment.
HSZH, which traces its roots to 1889, was once owned by UBS and later by St. Galler Kantonalbank AG, a regional lender. It was wound down in 2014 under the name Hyposwiss Zurich, or HSZH, after parts of the business were sold to various buyers.