The US Department of Justice (DoJ) announced that Credit Agricole (Suisse) SA (CAS), Dreyfus Sons & Co Ltd, Banquiers (Dreyfus), and Baumann & Cie, Banquiers (Baumann), each reached a solution under the US Tax Program signed in August 2013. These banks will collectively pay penalties of over $130m.

Thanks to the exchange of information ‘our offshore investigations into this conduct expand as each new entity, individual and foreign jurisdiction is disclosed’ said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division.

The DoJ states that CAS maintained accounts for certain US taxpayers in the names of corporations, foundations, trusts or other legal entities in non-US jurisdictions, including the Bahamas, the British Virgin Islands, Columbia, Curaçao, Hong Kong, Mauritius and Panama. CASC, its then wholly-owned subsidiary Credit Agricole Suisse Conseil (CASC), provided, directly or through its subsidiaries, corporate services to at least 25 such accounts. 18 of these accounts held US securities. Moreover, in at least some instances, CAS accepted from the directors of these entities a W-8BEN, an Internal Revenue Service (IRS) Form ‘that falsely declared or implied that the entity was the beneficial owner of the assets deposited in the account when CAS knew, or had reason to know, that the entity was being operated as a sham, conduit or nominee with respect to its US taxpayer owner’ says the DoJ.  At least six such offshore entity accounts held US securities and were not reported to the IRS.

In addition, upon the client’s instruction, CAS transferred assets from US-related accounts through non-US accounts at CAS and then to accounts at unaffiliated banks without documenting the US relationship to these assets at the time of the transfers. It follows that the receiving banks were unable to identify the assets that they received as US-related assets.

The DoJ reports that for the purpose of the US Tax Program, CAS described in detail the structure of its cross border business for US-related accounts including, but not limited to:

  • Its cross border policies and directives;
  • Data on desks and employees with elevated concentrations of US-related accounts;
  • Information on key external asset managers that had significant involvement with US-related accounts;
  • The names and functions of individuals who were involved in the structuring, operation or supervision of CAS’s cross border business for US-related accounts; and
  • Written summaries on its largest U.S.-related accounts and those involving conduct disclosed herein.

CAS’s NPA states thet since August, 2008, the bank maintained approximately 954 declared and undeclared US-related accounts with a maximum aggregate value of over $1.8bn. CAS will pay a penalty of $99.211m.

Dreyfus created Panama corporations to hold funds for clients after WWII. The practice extended well into the 2000s. ‘Among the Panama entity accounts created by Dreyfus are 33 US-related accounts, the oldest of which opened in 1951’ reports the DoJ. The combined high value of these accounts was approximately $90m. The US person beneficial owners of the accounts were properly identified as beneficial owners of the entities on Forms A pursuant to Swiss know your customer rules. However, the entities were identified as the beneficial owner on the W-8BEN forms. The same was true for 34 accounts for domiciliary entities created in foreign countries.

Dreyfus allowed 4 of the accounts to be closed in the form of bearer shares. A bearer share is a security that is not required to be registered and which can be transferred without an endorsement and is negotiable by whoever possesses it. Thus, it assisted in the further hiding of assets.

Separate from its traditional private banking services, Dreyfus management agreed to serve as a custodian for physical gold and cash for clients of a third party, Entity #1. According to the DoJ’s statement ‘a total of 315 US-related accounts with a combined high value of approximately $440m in gold and/or cash were held through Entity #1 and custodied by Dreyfus’. Each US person storing gold or cash with the bank has a subaccount of Entity #1’s master account.

On Dreyfus’s NPA we learn that since August, 2008, the bank held a total of 855 US-related accounts with a combined high value of assets under management of approximately $1.76bn. Dreyfus will pay a penalty of $24.161m.

Since August, 2008, Baumann opened US-related accounts for non-US corporations or trusts, which were established by external law firms.

The DoJ’s statement reports of a few wrong doing examples of the bank. ‘As one example, Baumann opened an account in June 2009 for a Panama corporation, established in 2000, where the beneficial owner as listed on Form A was a US citizen domiciled in the US.  This person was a retired lawyer living in Las Vegas. The beneficial owner provided a US passport upon opening the account, which was funded by $27m from the accountholder’s account at another bank. The accountholder signed Baumann’s compliance form indicating that the Panama corporation was in fact the beneficial owner of the assets for US tax withholding purposes when Baumann knew or should have known this was untrue’. On another example Baumann sccepted a |$2m  account from Credit Suisse and then closed it in 2011 via cash and cheques. Moreover, from June to August 2011, some clients instructed Baumann to buy 2,279 pieces of Krugerrand gold coins, at that time worth approximately $3.7m. In September 2011, the clients instructed Baumann to close the account. The remaining assets were withdrawn in cash, and the account closed in 2011.

The Baumann’s NPA reports that since August, 2008, the institution maintained a total of 167 US-related accounts, with an aggregate maximum value of $514.1m. Baumann will pay a penalty of $7.7m.