The US Department of Justice announced that Bank J. Safra Sarasin AG (Safra Sarasin), Coutts & Co Ltd (Coutts), Gonet & Cie (Gonet) and Banque Cantonal du Valais (BCVs) individually reached an agreement under the US Tax Program. They will collectively pay penalties of over $178m.

‘With today’s resolutions under the Swiss Bank Program, the department has reached agreements with 75 Swiss banks, imposed penalties in excess of $1 billion, and secured voluminous and detailed information regarding the illegal conduct of financial institutions, professionals and accountholders around the world’, said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

Safra Sarasin was formed in June of 2013 through the merger of two Swiss banks, Banque J. Safra (Suisse) SA (Safra) and Bank Sarasin & Cie AG (Sarasin). Safra Sarasin knew that it was highly probable that some US-related accounts held in their books were not complying with their US income tax and reporting obligations. Safra and Sarasin took the position that they could service such clients as long as the accountholders were prohibited from trading in US-based securities or required that the account would be structured in the name of a non-US-based entity.

Around 20% of the funds in US-related accounts closed by Safra Sarasin were transferred to banks in countries other than Switzerland and the United States, including Israel, Hong Kong and Liechtenstein.

A number of US-related accounts held at Sarasin were managed by external asset managers. One of these managers used intermediary accounts when a US client wanted to deposit funds into his or her account or transfer funds to a third party. In 2012, this same external asset manager was charged with conspiring to impede and impair the IRS in a US federal court.

In the Safra Sarasin’s NPA we learn that since August, 2008, the bank had 1,275 US-related accounts with an aggregate maximum value of approximately $2.2bn. Safra Sarasin will pay a penalty of $85.809m.

Coutts was part of the international Wealth Management Division of The Royal Bank of Scotland Group plc, which is majority-owned by the United Kingdom government.

Since August 2008, Coutts has accepted over $150m in inflows from other Swiss banks that were being investigated by the department. Coutts opened 465 accounts for US clients, some of whom did not comply with their obligations regarding US tax or Reports of Foreign Bank and Financial Accounts (FBARs).

Prior and after 2008, several relationship managers from the Coutts private banking traveled to the US to meet and recruit US clients. Coutts relationship managers in Switzerland aided and assisted certain US clients with undeclared accounts by structuring the assets by various subsidiary trust companies of Coutts. The bank has operated its own trust companies in Liechtenstein and Switzerland. In addition to the relationships they had with affiliated trust companies, Coutts relationship managers coordinated with external trust companies to create and administer offshore structures for its US clients.

The Coutts’ NPA tells us that since August, 2008, the bank held 1,337 US-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of c.a. $2.1bn. Coutts will pay a penalty of $78.484m.

Gonet opened accounts for US taxpayers who had left other Swiss banks that were known targets of investigations by the department, including UBS and Credit Suisse. Gonet knew or should have known that the beneficial owners were attempting to evade their US tax requirements. The relationship managers had accounts structured with the assistance of their external advisors.

Gonet’s NPA states that since August, 2008, the bank held 150 US-related accounts with an aggregate maximum balance of approximately $254.5m. Gonet will pay a penalty of $11.454m.

Over the years BCVs’ position was that it could service US clients that it knew or had reason to believe were non-compliant with their US tax obligations as long as the account did not trade or hold US securities. According to the DoJ’s statement ‘an internal memorandum written to BCVs’ board of directors in October 2009 stated that BCVs had 63 American clients whose accounts traded securities, but only seven of those 63 clients submitted Forms W-9 to BCVs that authorized income generated from those securities to be reported to the IRS. The other 56 American clients had not authorized their names to be disclosed to the IRS’.

According to BCVs’ NPA since August, 2008, the bank maintained 185 US-related accounts with a maximum aggregate value of approximately $72m. BCVs will pay a penalty of $2.311m.