The US Department of Justice (DoJ) announced the filing of criminal charges against Bank Julius Baer & Co Ltd (Julius Baer), a so-called Category 1 bank. The bank is charged with conspiring with US taxpayer to hide billions of dollars in offshore accounts from the Internal Revenue Service (IRS) and to evade US taxes.

A deferred prosecution agreement was signed with Julius Baer under which the company admits that it knowingly assisted many of its US clients in evading their tax obligations.  The agreement requires Julius Baer to pay a total of $547m by no later than February 9, 2016.

according to the DoJ statement, ‘the criminal charge is contained in an Information  alleging one count of conspiracy to

(1) defraud the IRS,

(2) to file false federal income tax returns and

(3) to evade federal income taxes.

If Julius Baer abides by all of the terms of the agreement, the government will defer prosecution for three years and then seek to dismiss the charges’.

From at least the 1990’s through 2009, Julius Baer helped many of wealthy Americans evade their US tax obligations by opening and maintaining undeclared accounts and by allowing third-party asset managers to open undeclared accounts for US taxpayers at the bank.

The DoJ adds that ‘Julius Baer undertook, among other actions, the following:

(1) Entering into “code word agreements” with US taxpayer-clients.
(2) Opening and maintaining accounts for many US taxpayer-clients held in the name of non-US corporations, foundations, trusts, or other legal entities or non-US relatives, thereby helping such US taxpayers conceal their beneficial ownership of the accounts.

Julius Baer also had a memo entitled “US Clients Do’s & Don’ts”  which was circulated internally in 2006.

At peak time in 2007, Julius Baer had approximately $4.7bn in assets under management relating to approximately 2,589 undeclared US-related accounts. From 2001 through 2011, Julius Baer earned approximately $87m in profit on approximately $219m gross revenues from its undeclared US-related accounts, including accounts held through structures.

In addition, two Julius Baer client advisers, Daniela Casadei and Fabio Frazzetto, pleaded guilty in Manhattan federal court today. Casadei and Frazzetto were originally charged in 2011.