07 August 2019

Swiss Bank learns the cost of non-compliance

Bank which ignored advice from its compliance officer is slapped with a $10.6 million penalty.

The US Department of Justice has reached a resolution and non-prosecution agreement with Zurich-based LLB Verwaltung (Switzerland) AG over allegedly hiding foreign assets from U.S. tax authorities.


Documents reveal the Swiss-based private bank might have saved the bank $10,680,554.64 had they listened to their compliance officer. According to the statement of facts agreed to by the parties, LLB-Switzerland and some of its employees, including members of the bank’s management, conspired with a Swiss asset manager and US clients to conceal those U.S. clients’ assets and income from the Internal Revenue Service (IRS) through various means, including using Swiss bank secrecy protections and nominee companies set up in tax haven jurisdictions. At its peak, LLB-Switzerland had approximately one hundred U.S. clients holding nearly $200 million in assets. The majority of those accounts were in the names of nominee entities. “This resolution is another step forward in the Department of Justice’s pursuit of tax evaders, who use foreign bank accounts to commit criminal activity, and those institutions, who enable such criminal tax activity,” said principal deputy assistant attorney general Richard E Zuckerman. “The Department is dedicated to holding both financial institutions and individual offenders accountable for tax evasion.”

Compliance warning

In 2009, a Swiss newspaper published an article stating the Swiss asset manager was under investigation by US authorities and LLB-Switzerland’s management held a meeting with the Swiss asset manager regarding his U.S. clients. The bank’s compliance officer proposed two courses of action: Require US clients to sign Forms W-9 and, should they refuse to do so, push the clients out of the bank; or encourage US clients to participate in the IRS’s Offshore Voluntary Disclosure Initiative (OVDI), in which U.S. taxpayers could avoid prosecution for tax evasion relating to their undeclared offshore accounts. “LLB-Switzerland’s management rejected requiring Forms W-9 for all customers,” according to the statement of facts, and the Swiss asset manager opposed encouraging clients to join the OVDI. Ultimately, the bank made no formal policy changes until two years later, when a grand jury had indicted the Swiss asset manager. At that time, the bank decided it should no longer have undeclared US clients.

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