Offshore Tax Evasion Update: Program for Swiss Banks Advances; Credit Suisse Deal in the Works?

The latest edition of the publication Practical European Tax Strategies includes an article that Stephanie Chomentowski and I drafted on the subject of the Justice Department’s program for Swiss banks. See “Swiss Banks Must Disclose Account-Holder Information Under Agreement with U.S.,” Practical European Tax Strategies (December 2013) (available here).  Our article discusses the DOJ’s “Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks” that was announced earlier in 2013 and provides amnesty from criminal prosecution for banks that agree to participate in the program.  (See prior posts here and here).  Swiss banks that wish to participate in the program were required to notify the Justice Department by December 31, 2013.  Media reports indicate that many Swiss banks came forward to take advantage of this program prior to the year-end deadline.  See The Wall Street Journal, “More Swiss Banks Join U.S. Disclosure Program” (available here).

In related news, The Wall Street Journal is reporting today that Switzerland’s second largest bank, Credit Suisse, may be nearing a deal with the U.S. to resolve its ongoing dispute with the Justice Department over allegations that the bank assisted U.S. taxpayers in hiding funds in Swiss bank accounts.  See The Wall Street Journal, “Credit Suisse Settlement with U.S. Could Top $800 Million” (available here).  (Credit Suisse is not eligible to participate in the DOJ Swiss bank amnesty program because it has been under criminal investigation by the Justice Department along with about 12 other Swiss banks.)  The WSJ article reports anonymous sources as stating that the fine to be levied on Credit Suisse could exceed $800 million, which would represent the largest fine imposed on a financial institution since the Justice Department and IRS began its crackdown on offshore tax evasion in 2008.  In February 2009, Switzerland’s largest bank, UBS AG, entered into a deferred prosecution agreement with the U.S. and agreed to pay a fine of $780 million.  As part of its deal with the U.S., UBS was required to disclose the names of certain of its U.S. accountholders.  A deal with Credit Suisse would almost certainly require that bank to make similar disclosures of the names of its U.S. accountholders.

U.S. taxpayers who held accounts at Credit Suisse and have not yet taken steps to remedy instances of tax non-compliance may take advantage of the IRS Offshore Voluntary Disclosure Program (OVDP), a voluntary compliance initiative that offers amnesty from criminal prosecution for individuals who disclose the existence of previously unreported offshore bank accounts, file amended tax returns and FBARs, and pay all back taxes, interest, and penalties.  (See prior posts here and here).  Taxpayers who wish to take advantage of the OVDP must act quickly, because the program becomes unavailable if Credit Suisse discloses an accountholder’s name to the U.S. before the OVDP process is commenced.

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