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On December 29, 2016, the US Department of Justice (DOJ) announced that it had reached final arrangements with the financial institutions meeting the requirements of its Swiss Bank Program.
The Program, which was originally signed by the United States and Switzerland in August 2013, has provided a path for Swiss banks to cooperate in the DOJ's investigations into the use of foreign bank accounts to evade US taxes.
Four categories of Swiss financial institutions were delineated by the Program. Category 1 included Swiss banks already under investigation when the Program was announced and therefore not eligible to participate. Category 2 was reserved for those banks that advised the DOJ by December 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared US-related accounts.
In exchange for a non-prosecution agreement, and the payment of appropriate penalties, Category 2 banks have made a complete disclosure of their cross-border activities; provided detailed information on accounts in which US taxpayers have a direct or indirect interest; are cooperating in tax treaty requests for account information; are providing detailed information as to other banks that transferred or accepted the undeclared funds; and must cooperate in any related criminal and civil proceedings for the life of those proceedings.
On the other hand, banks eligible for Category 3 of the Program are those that established with the DOJ that they did not commit tax or monetary offenses and have an effective compliance program in place. Upon satisfying the necessary requirements, Category 3 banks have received a non-target letter pursuant to the terms of the Program.
Finally, Category 4 banks have been able to demonstrate that they have met certain criteria for deemed-compliance with the reporting requirements under the US Foreign Account Tax Compliance Act. Category 4 banks have also been eligible for a non-target letter.
The DOJ confirmed that appropriate arrangements have now been made with all of the Swiss bank categories. Between March 2015 and January 2016, the DOJ executed non-prosecution agreements with 80 Category 2 Swiss banks and collected more than USD1.36bn in penalties. Between July and December 2016, four banks and one bank cooperative satisfied the requirements of Category 3, making them eligible for non-target letters. No banks qualified under Category 4 of the Program.
"The completion of the resolutions with the banks that participated in the Swiss Bank Program is a landmark achievement in the Department's ongoing efforts to combat offshore tax evasion," Principal Deputy Assistant Attorney General Caroline Ciraolo concluded. "We are now in the legacy phase of the Program, in which the participating banks are cooperating, and will continue to cooperate, in all related civil and criminal proceedings and investigations."
"The completion of the examination of Category 3 and 4 banks in the Swiss Bank Program marks another milestone in the continued success of this valuable criminal compliance effort," Chief Richard Weber of the Internal Revenue Service's Criminal Investigation (CI) commented. "IRS-CI will continue to partner with DOJ in pursuing those who facilitate or engage in international income tax evasion."
In January 2016, it was disclosed that, in addition to the Swiss banks' penalties, more than 54,000 taxpayers had already come forward to pay to the Internal Revenue Service more than USD8bn in taxes, interest, and penalties.
"The DOJ is committed to aggressively pursuing tax evasion, and the Swiss Bank Program has been a central component of that effort," US Attorney General Loretta Lynch said. "Through this initiative, we have uncovered those who help facilitate evasion schemes and those who hide funds in secret offshore accounts."
Acting Associate Attorney General Stuart Delery added that "the information and continuing cooperation we have required the banks to provide in order to participate in the program is allowing us to systematically attack offshore tax avoidance schemes."
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