Another Swiss Bank Falls Into Line

23 Dec

Rothschild to Pay $45.4 mn to End U.S. Tax Probe

December 18, 2015
This was announced in today’s  AccountingToday.com online.

 

“Edmond de Rothschild (Suisse) SA agreed to pay $45.4 million to avoid prosecution for helping U.S. clients evade taxes, admitting it aided them in moving cash and using sham offshore entities to hide money from the Internal Revenue Service. The bank will also be handing lists of their tax evading clinets

Rothschild is the 68th Swiss bank to reach an accord with the U.S. Justice Department this year, which has secured $802.3 million under a disclosure program that requires firms to say how they helped Americans cheat and where their money went.

In a non-prosecution agreement, the bank signed a statement of facts that detailed misconduct by relationship managers at Edmond de Rothschild (Suisse) and a Lugano unit that handled 950 U.S. accounts that held $2.16 billion between 2008 and 2013. In that period, Rothschild processed at least 155 cash withdrawals of $30,000 or more for 53 U.S. clients, including one that took out $2.53 million in one transaction, according to the agreement.

The relationship managers coordinated with an external asset manager who set up an offshore entity in Singapore, and they “knew or had reason to know” clients used advisers to set up structures in the British Virgin Islands, Panama and Liechtenstein, according to the pact, released Friday by the Justice Department.

Rothschild said the settlement will have no impact on its financial results. The bank links itself to seven generations of financiers who have advised royalty, governments, and railway barons for 250 years.

The bank also said in the accord that it helped clients in “covertly repatriating offshore funds” by providing credit cards, cash cards and debit cards to move money not declared to the IRS. “These services allowed U.S. clients to withdraw funds remotely or pay for goods and services without a paper trail back to their undeclared accounts in Switzerland,” according to the agreement.”

No doubt they will also reveal to the IRS the names of their clients who are possible tax evaders. Again, I contend that probably all of these tax evaders are residents of the USA and NOT EXPATS living abroad. Nevertheless, American citizens abroad will continue to come increasingly under scrutiny as possible tax cheats. FATCA marches forward.

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5 Responses to “Another Swiss Bank Falls Into Line”

  1. renounceuscitizenship December 23, 2015 at 1:14 PM #

    Reblogged this on U.S. Persons Abroad – Members of a Unique Tax, Form and Penalty Club and commented:

  2. Daniel Kuettel December 23, 2015 at 8:01 PM #

    There are some points here which need to be taken into consideration.

    1) The information written in the Non-Prosecution Agreements is not necessarily accurate. It has been reported that they contain inaccuracies which the banks were not allowed to correct and the banks are also not allowed to discuss these agreements.

    2) The banks generally complied with US and Swiss laws. The practices criticized in the agreements were standard legal practices performed by all banks. They may not be compliant with US law, but Switzerland is not US territory.

    3) The Non-Prosecution Agreements do not establish guilt or innocence. They do not identify “tax cheats”. It is more about disclosing privacy, which is what the fines are based on.

    4) Most of the clients subject to these agreements are expats and most of these expats are probably innocent. Often, the agreements admit that the banks did not market their services to U.S. citizens.

    • danielkovnat December 24, 2015 at 6:15 AM #

      1. Good points, but it sounds almost as if you are writing as a bank director. I ask that if the “banks are also not allowed to discuss these agreements,” how can anyone know that the information written in them is not accurate?

      2. The banks may have complied with US and Swiss laws, as your say, but these practices are now costing the banks millions. If they were all so compliant and legal, why are they paying so much to avoid prosecution? The answer is clear. Their practices consisted of aiding and abetting (in fact enticing) Americans to act illegally. I believe that makes them accomplices and they must share culpability. They are now, in a sense, “copping a plea” with their $45,000,000 payment to the United States Department of Justice.

      3. The list of names of their tax evading clients will be duly scrutinized and investigated. We’ll see the results when the Department of Justice prosecutes them.

      4. How do you know that “most of the clients subject to these agreements are expats” when their names and addresses are not released? I contend that MOST OF THESE AMERICAN TAX EVADERS ARE NOT EXPATS, but that they give us expats a bad name. We become guilty by association. I know of many expats where I live and they all do their banking locally, using their “foreign” accounts for daily purposes such as depositing their pay checks, managing their credit cards, paying their bills, and all the myriad functions of one’s local bank. None have out of country “off shore” bank accounts.

      • Daniel Kuettel December 26, 2015 at 7:32 AM #

        I live in Switzerland and renounced U.S. citizenship due to discrimination caused by FATCA, thus I’ve been following the issue.

        Regarding the quality of the NPA’s, I was referring to the statement of a bank representative who stated that the agreement contained errors which the bank wasn’t allowed to correct and the bank is not allowed to make a public statement about it:

        «Ein Vertreter einer Bank behauptet, dass dieses Papier vor Fehlern strotze. In den Diskussionen mit den US-Behörden habe es für seine Bank keine Möglichkeit gegeben, sich gegen die dann im Papier festgehaltene Darstellung zu wehren. Ausserdem dürfen sich die Banken, die sich mit dem DoJ geeinigt haben, nicht öffentlich zu den Abmachungen äussern.»
        http://www.nzz.ch/wirtschaft/die-kadenz-bei-den-einigungen-im-us-steuerstreit-steigt-1.18654232

        The banks are paying so much to get the US off of their back since it has been threatening them. It is important to note that most banks did not choose to enter into this program. They were forced into it and many didn’t belong. They are paying fines because they offered financial services to U.S. citizens regardless if the clients are guilty or innocent. It is due to this reason that many banks are now rejecting U.S. citizens, as mentioned in the agreements. One must avoid Americans to not be threatened and fined by the U.S. government.

        The IRS has a list of names of tax cheats, and they all live in America:

        https://www.irs.gov/uac/Offshore-Tax-Avoidance-and-IRS-Compliance-Efforts

        The Swiss press wrote that some banks entered the “US Program” because they have dual citizen clients living in Switzerland. Such is also confirmed in some of the NPA’s:

        «Bei einigen Instituten sind die Doppelbürger sogar der Hauptgrund dafür, dass sie sich in die Gruppe 2 eingeteilt haben»
        http://www.nzz.ch/wirtschaft/wirtschaftspolitik/erster-einblick-in-das-us-offshore-geschaeft-1.18592175

  3. danielkovnat December 26, 2015 at 10:48 AM #

    Daniel,

    I appreciate your input and it seems to me that you believe that what you are saying is true, although it is not entirely clearly stated.

    Firstly, let me say that the link you provide to, as you say, “The IRS has a list of names of tax cheats, and they all live in America:” is a link that I actually provided in a post that I write in 2011 entitled “The IRS is Catching the Big Fish.” Here is the link to that post:
    http://wp.me/p1JAbt-G
    This list is actually kept current by the IRS, the last update being December 2, 2015.

    As I have said time and time again, and you now agree in your reply, that all of the tax cheats indicted and found guilty by the US Department of Justice, are residents of the USA and not expats.

    You say that the banks are “paying fines because they offered financial services to U.S. citizens regardless if the clients are guilty or innocent.” You must be naive. These banks met with those tax evaders in secret, provided them with credit cards to enable them to use the money that was never reported to the IRS, and when the pressure was put to other banks in Switzerland, actually assisted their tax evading clients to open bank accounts and move their money into places which were not being monitored by the IRS. What those Swiss banks (and banks in Lichtenstein, Singapore and other countries which had sanctioned their illegal activities) are doing is avoiding being taken to court where their defense will be extremely expensive because of huge fees their lawyers will charge them, and where they will ultimately loose. The UBS tried to fight the US DOJ in the US courts and lost. I suggest you read this 2010 report from Reuters, “How the U.S. cracked open secret vaults at UBS.” Here is the link: http://www.reuters.com/article/us-banks-ubs-idUSTRE6380UA20100409

    I also suggest that you not believe everything your Swiss bank representatives say in their public relations efforts to save face.

    Wishing you a Happy and Healthy New Year and a Successful 2016.

    Daniel Kovnat

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