(Bloomberg) BSI SA, a Swiss private bank, admitted helping customers duck taxes by using coded language, nameless debit cards and fake identities as part of a landmark $211 million accord to avoid U.S. prosecution.
Clients moving cash from secret accounts at the firm on Lake Lugano to their cards would tell BSI’s bankers the “gas tank is running empty” or ask “can you download some tunes for us?” the Justice Department said Monday in announcing the non-prosecution agreement. It’s the first case from a program letting Swiss banks escape charges by describing dealings with Americans. Dozens of firms seeking leniency watched it closely.
In some instances, BSI helped U.S. clients create sham corporations and trusts, opened numbered accounts that shielded identities even from its own employees and issued debit and credit cards with no name visible, the Justice Department said. Investigators credited the firm with providing “substantial assistance” in identifying the clients, and said it’s helping track money “well beyond Switzerland” to new tax-evasion schemes.
“We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals,” Stuart F. Delery, the Justice Department’s acting associate attorney general, told reporters.
Banks that entered the program are seeking non-prosecution agreements, which aren’t available to the dozen Swiss banks under criminal investigation. Credit Suisse Group AG’s main bank subsidiary pleaded guilty last year and paid a $2.6 billion fine. BSI pledged to help the Justice Department root out tax evasion.
“It’s certainly fundamentally positive that finally one of the bigger ones has settled,” said Andreas Brun, a Zurich-based analyst at Zuercher Kantonalbank, said of BSI. “This means a solution is coming closer for all banks in the program.”
Swiss banks are also dealing with tax investigations by France and Germany and may face other probes into offshore structures across the globe after providing the Justice Department with details of money transfers. Many Swiss banks have operations in locations such as the Caribbean, the Channel Islands, Dubai and Hong Kong.
U.S. authorities “intend to follow that money to uncover additional tax evasion schemes,” the Justice Department said in a statement.
BSI managed about 3,500 U.S. accounts with a peak value of $2.78 billion in 2008, according to a statement of facts it admitted. At least 32 clients had prepaid debit cards known as “travel cash cards,” issued without a name, according to the statement of facts. Bankers let clients “withdraw funds remotely or pay for goods and services without a paper trail back to their undeclared assets in Switzerland,” BSI said.
Before 2009, clients could transfer $10,000 at a time to cards, as much as $30,000 a month and $100,000 a year. After 2009, at least 11 clients got a second type of debit card that allowed higher maximum amounts, BSI said.
For decades until 2013, “BSI conducted a U.S. cross-border banking business that aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts in Switzerland,” the bank admitted.
Assicurazioni Generali SpA last year agreed to sell BSI to Grupo BTG Pactual of Brazil. The sale is still subject to regulatory approvals.
“We have resolved our legacy tax issue with the DOJ and can now focus on our business and on the implementation of our growth strategy,” BSI said in a statement.
While 106 Swiss banks signed up for the program, some have dropped out. Acting Assistant U.S. Attorney General Caroline Ciraolo declined to say Monday how many banks remain in the program. She said the department hopes to conclude the cases by the end of the year.
Ciraolo also wouldn’t say how many of the 3,500 accounts weren’t declared to the IRS. She said the bank has turned over “some names when they were authorized” by Swiss authorities, but she wouldn’t say how many.
Fighting offshore tax evasion remains a “top priority” of the Internal Revenue Service Criminal Investigation Division, Chief Richard Weber said in a statement.
—With assistance from Jeffrey Vögeli in Zurich and Giles Broom in Geneva.
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