The US Department of Justice announced on the very last day of the year that Bank Lombard Odier & Co Ltd (Lombard Odier) and DZ Privatbank (Schweiz) AG (DZ Privatbank) each reached a solution under the US Tax Program. They will collectively pay more than $107m. Each bank agrees to cooperate in any related criminal or civil proceeding.
As a reminder, Lombard Odier is a partner-owned private bank based in Geneva, Switzerland. Lombard Odier provides private banking, asset management, and technology and business infrastructure services to individuals and entities located inside and outside Switzerland.
Lombard Odier offered traditional Swiss banking services, such as numbered accounts, hold mail, insurance wrappers, and structuring, that assisted US clients in the concealment of assets and income from the Inland Revenue Service (IRS).
According to the DoJ statement ‘Lombard Odier’s senior management decided, in June 2008, to prohibit new US taxpayer clients coming from UBS and to refrain from hiring UBS relationship managers with US taxpayer clients. Shortly thereafter, Lombard Odier implemented a Regularize or Leave Action Plan, the tenets of which were described in a written policy, dated October 8, 2008, to be communicated verbally to the group heads of Lombard Odier’s private banking business unit. Pursuant to the plan, Lombard Odier’s management required that relationship managers instruct each of their US clients to sign a Form W-9, voluntarily disclose their accounts to the IRS or close their accounts’.
In Lombard Odier’s NPA we learn since August, 2008, the bank had 1,121 US-related accounts, amounting to a maximum assets under management value of c.a. $4.45bn, including assets of declared accounts. Lombard Odier will pay a penalty of $99.809m.
DZ Privatbank was founded in 1975 as BEG Bank Europäischer Genossenschaftsbanken, a public limited liability company under Swiss law. In early 2006, its name was changed to DZ Privatbank (Schweiz) AG.
According to the DoJ statement ‘through its managers, employees and/or others, DZ Privatbank knew or had reason to know that some US taxpayers who had opened and maintained accounts at DZ Privatbank were not complying with their US income tax and reporting obligations’. Even after August, 2008, DZ Privatbank conducted a US cross-border banking business that aided and assisted certain of its US clients in opening and maintaining undeclared accounts in Switzerland.
In 2008, DZ Privatbank decided to expand its international business focusing on customers domiciled in various countries, including the US. DZ Privatbank opened 222 new US-related accounts for approximately $106m between January and October 31, 2009. Prior to that period, DZ Privatbank had approximately 110 US-related accounts for $133m.
‘In May 2009, DZ Privatbank began accepting customers from Credit Suisse who had either terminated their relationship with Credit Suisse or whom Credit Suisse had terminated’ states the DoJ.
In the DZ Privatbank’s NPA we learn, since August, 2008, the bank had a total of 691 US-related accounts with aggregated assets under management of approximately $498m. DZ Privatbank will pay a penalty of $7.452m.