The Swiss Bank Program is Coming to an End

Switzerland was once a haven for investors who wanted to have a safe place to keep their money offshore. This has not been the case for a long time. Many offshore investors have had their account information turned over to the IRS. Still others have worked with a Washington DC tax law firm to participate in voluntary disclosure of offshore funds before taxing authorities came after them for failure to declare their accounts in required annual disclosures (FBARs).

The reason why the Swiss Banking Industry is no longer a safe haven for those who want privacy is, in large part, because of a major crackdown on banks that helped to facilitate tax evasion.

A key component of the U.S. government's efforts to find tax evaders was a program called the Swiss Bank Program. This program is now coming to an end, but this doesn't mean that those with funds offshore in Switzerland are safe from civil or criminal action for tax evasion. The end of the Swiss Bank Program also does not signify an end to efforts on the part of U.S. authorities to find undeclared offshore funds.

The Swiss Bank Program is Winding Down

The Swiss Bank Program incentivized banks to admit to aiding in tax evasion and incentivized banks to provide information on U.S. affiliated accountholders.

The program worked by allowing banks to come forward, pay a fine, and provide information in exchange for which the bank would not face criminal charges.

Plans for the Swiss Bank Program were developed in 2008 and the program was officially launched in August 2013, after diplomatic negotiations with Switzerland. The Program established different categories of banks depending upon exactly what various financial institutions had done.

For example, Category 1 banks weren't eligible to participate because they were already being investigated, while Category 4 banks had few U.S. clients and less than two percent of their base of accountholders was foreign.

There were no Swiss banks in Category 4, but there were many in other categories which entered into an amnesty agreement with U.S. authorities. 

• From March of 2015 through January of 2016 alone, the U.S. Department of Justice entered into settlements with 80 different Category 2 banks. These banks collectively paid $1.36 billion in financial penalties, with an average fine per bank of $17 million.
• There were four Category 3 banks and one bank cooperative which fit into Category 3, which is the category for banks who largely complied with the law. These five institutions received acknowledgment of their tax law compliance from the DOJ between July 2016 and December 26.
• There were also 14 category 1 banks identified as a part of the Swiss Bank Program as not being eligible to participate due to ongoing investigations.

Now that so many banks have participated, U.S. authorities are winding down the Swiss Bank Program. This is occurring because an announcement from the Department of Justice indicated it had reached final resolutions with all of the financial institutions eligible to participate in the Program.

The end of the Program is not necessarily good news for those with accounts offshore. It is ending not because authorities have decided to move on, but instead is coming to a close simply because there are no more banks left to participate. The DOJ has indicated it is in the “legacy” phase of the program, which involves working with cooperative banks to conduct investigations into accountholders and to pursue criminal and civil proceedings against those individual accountholders.

U.S. affiliated individuals with offshore accounts could find themselves the subject of these proceedings. If so, it is imperative to consult with attorney Kevin Thorn for help in responding proactively to an investigation or to accusations of wrongdoing.