The US Department of Justice (DoJ) announced that Luzerner Kantonalbank AG, Habib Bank AG Zurich, Banque Heritage S.A., and Hyposwiss Private Bank Genève S.A. have reached an agreement under the US Tax Program that started in August 2013. These banks signed up under Category 2 banks, i.e. banks that have reason to believe that they have committed tax-related offenses. Collectively these banks will pay a penalty of more than $25m and will need to continue to cooperate with the DoJ.

According to the terms of the Luzerner Kantonalbank AG’s non-prosecution agreement (NPA) signed, the bank held a total of 595 US-related accounts since august 2008. They amounted to approximately $300m. Luzerner will pay a penalty of $11.031 million.

In the Habib Zurich’s NPA, we learn that employees of Habib American Bank, Inc. (HAB), an unrelated bank with common ownership, referred US persons to the Habib Swiss Office. Since August, 2008, Habib Zurich maintained 125 US-related accounts for approximately $118.9m in assets under management. The bank will pay a penalty of $9.4m.

According to the DoJ Banque Heritage established banking relationships with US taxpayers who were transferring funds from other Swiss financial institutions that were closing such accounts. ‘In at least seven such instances, comprising at least $10 million, Banque Heritage knew, or had reason to know, that the accounts were or may have been undeclared. Banque Heritage also:

  • Transferred the beneficial ownership of some U.S. taxpayers’ accounts to non-US persons’ accounts at Banque Heritage; and
  • Facilitated the transfer, to Banque Heritage’s affiliate in Uruguay, of approximately $700,000 held in at least two U.S.-related accounts being closed at Banque Heritage, when it knew or had reason to know that these accounts were undeclared.’

The Banque Heritage’s NPA tells us that since August, 2008, the bank had 47 US-related accounts with US beneficial owners that were held by entities created in Panama, the British Virgin Islands, Hong Kong, Belize or other foreign countries. All together the institution had 131 US-related accounts with an aggregate maximum balance of approximately $198m. Banque Heritage will pay a penalty of $3.846m.

According to the DoJ’s statement ‘Hyposwiss Geneva opened, serviced and profited from accounts for U.S. clients who Hyposwiss Geneva knew or had reason to know were not complying with their U.S. income tax obligations.  In addition to offering the traditional Swiss banking services of hold mail and accounts with code names or numbers, Hyposwiss Geneva accepted instructions in connection with at least 22 U.S.-related accounts not to invest in U.S. securities and not to disclose the names of U.S. clients to U.S. tax authorities, including the IRS’.

In the Hyposwiss Geneva’s NPA we learn that since August, 2008, Hyposwiss Geneva opened and maintained at least 21 undeclared accounts in the name of structures that were beneficially owned by US taxpayers, while knowing, or having reason to know, that these structures were used by US clients to help conceal their identities from the IRS’. Globally Hyposwiss Geneva held a total of 91 US-related accounts with approximately $74.9m in assets under management. The bank will pay a penalty of $1.109m.