Swiss banks closer to deals in tax-evasion probe

More than 100 financial institutions willing to ID tax evaders in exchange for non-prosecution deals.

More than 100 Swiss banks and other institutions have signaled they will seek non-prosecution agreements and provide information to U.S. authorities investigating suspected off-shore tax evasion by Americans, a top Department of Justice official said Saturday.

The announcement by Assistant Attorney General Kathryn Keneally provided the first government confirmation on the number of Swiss banks that are expected to disclose how they helped U.S. clients evade taxes, provide financial data about the clients and pay fines to settle criminal investigations.

In all, 106 Swiss financial institutions filed formal letters of intent by the Dec. 31, 2013, deadline set by federal investigators, said Keneally, who made the announcement at the winter meeting of the American Bar Association’s tax section in Phoenix.

The submissions mark a significant new crack in traditional Swiss banking secrecy and represent the latest expansion of the more than five-year-old effort by the Department of Justice and IRS to identify and prosecute the owners of offshore accounts secretly controlled by Americans.

“It will probably force people who didn’t take advantage of previous (tax leniency) offers by the IRS and ignored all the warnings to finally come forward and try to enter the program,” said Martin Press, a tax law expert at the Gunster law firm in Fort Lauderdale.

Once federal investigators obtain identifying data about suspected tax violators, they no longer qualify for leniency, said Press.

U.S. and Swiss officials reached agreement last year on a framework that would enable Swiss banks to settle suspicions that they helped clients duck the IRS. Switzerland had previously opposed such agreements on grounds that they would violate the country’s strict bank secrecy laws.

The diplomatic stakes escalated last year after Swiss bank Wegelin & Co. pleaded guilty in January 2013 to a U.S. criminal indictment that accused it of conspiring with American clients to hide more than $1.2 billion from the IRS. The bank, ordered to pay nearly $57.9 million in combined restitution, fine and forfeiture, has since shut down.

As the Dec. 31 filing deadline neared, Keneally warned that Swiss banks involved in helping U.S. tax evaders face “significant risks” of being “targeted and prosecuted.”

Among others, the federal investigation has focused on Credit Suisse, Julius Baer Group and HSBC, which have previously said they expect to pay respective fines in U.S. settlements.

UBS, Switzerland’s largest bank, entered a deferred-prosecution agreement with U.S. investigators in 2009. UBS paid a $780 million fine and turned over data on an estimated 4,450 American clients after acknowledging it had helped them duck U.S. taxes.

Since then, U.S. authorities have filed criminal cases against dozens of Americans who failed to disclose offshore accounts to the IRS and pay taxes on hidden income. Collectively, those actions have forced convicted offenders to pay hundreds of millions of dollars for overdue taxes, penalties and interest.

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