A Swiss-US agreement allows wrongdoers to settle financially to avoid criminal prosecution in the United States.
The Zurich-based Neue Privat Bank (NPB) has paid $5 million (CHF5 million) fine to settle a criminal tax evasion investigation in the United States. NPB is one of a handful of so-called ‘category 1’ Swiss or Swiss-based bank branches that were still facing sanctions at the start of this year.
On Thursday the Department of Justice (DoJ) announced the bank had agreed to pay the financial penalty as part of a deal to avoid full prosecution in the US courts.
According to the DoJexternal link, NPB held 353 US-related accounts between August 1, 2008 and December 31, 2015, containing an aggregate value of around $400 million. Although by 2010 NPB stopped accepting new US clients who did not declare their assets to the tax authorities, it still kept existing tax dodgers on its books.
Despite efforts to hide this fact by having external agencies manage these accounts, NPB’s activities were uncovered by the DoJ.
The tax evasion battle between the Swiss financial sector and the DoJ began a decade ago when whistleblower Bradley Birkenfeld provided evidence that his former employer, UBS, was helping wealthy Americans evade taxes.
Switzerland’s largest bank was fined $780 million in 2009, but it was later discovered that other Swiss banks had been poaching UBS clients after the criminal probe had been announced. One of these institutions, Switzerland’s then oldest private bank Wegelin, was forced to close down in 2013 after being taken to court and fined $74 million.
Later that year, a Swiss-US agreement laid the foundations for a Swiss Bank Programexternal link that enabled wrongdoers to settle financially to avoid criminal prosecution through the US courts. This classified banks under four categories: category 1 was those banks already under investigation, category 2 comprised of banks that wanted to come clean about their activities, whilst categories 3 and 4 contained those that had no case to answer.
In January 2016, 80 category 2 Swiss banks had shelled out $1.36 billion in fines to avoid prosecution.
Of the dozen or so category 1 banks, Credit Suisse was fined more than $2.5 billion in 2014. NPB’s fine announced on Thursday has raised hopes that the few remaining category 1 banks still being probed, including the cantonal banks of Zurich and Basel and private bank Pictet, could soon reach settlement.
The tax evasion spat as a whole forced Switzerland to end its tradition of providing strict banking secrecy, a practice that had shielded foreign tax evaders from the scrutiny of their home tax authorities.
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