International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, December 1, 2015

Deutsche Bank (Suisse) Pays $31M Penalty for Complicity of Clients' Tax Evasion

Since Aug. 1, 2008, Deutsche Bank Suisse had 1,072 U.S.-related accounts with an aggregate maximum value of approximately $7.65 billion.  Deutsche Bank Suisse will pay a penalty of $31.026 million.   Download Deutsche Bank Suisse Executed NPA and SOF

Deutsche Bank Suisse is headquartered in Geneva, Switzerland, with additional offices in Zurich and Lugano, Switzerland and Irs_logo
is part of the Deutsche Bank Group.  From at least August 2008 through August 2013, Deutsche Bank Suisse enabled some U.S. taxpayers to evade their U.S. tax and filing obligations, resulting in the filing of false income tax returns with the Internal Revenue Service (IRS) and allowing U.S. taxpayers to hide offshore assets from the IRS.

Deutsche Bank Suisse offered a variety of services and permitted some practices that it knew could and did assist U.S. taxpayers in concealing assets and income from the IRS.  Deutsche Bank Suisse offered hold mail services, and notes written by Deutsche Bank Suisse employees on some hold mail forms explained that the client’s mail was not delivered or picked up because the client resided in the United States and his or her account was “not declared.” Deutsche Bank Suisse also provided U.S. beneficial owners with debit cards linked to accounts held at Deutsche Bank Suisse or credit cards whose balances the U.S. beneficial owners instructed Deutsche Bank Suisse to pay from accounts held at the bank. Use of these cards by U.S. taxpayers facilitated their access to or use of undeclared funds on deposit at Deutsche Bank Suisse.  Deutsche Bank Suisse processed standing orders for checks in amounts less than $10,000 to be sent on a monthly basis into the United States, and in at least two instances those checks were issued to the U.S. beneficial owners from accounts held in the name of Liechtenstein foundations.

In 2001, Deutsche Bank Suisse entered into a Qualified Intermediary (QI) Agreement with the IRS.  Under a QI Agreement, if an accountholder wished to trade in U.S. securities without being subjected to mandatory U.S. tax withholding, the accountholder’s bank was required to obtain the consent of the accountholder to disclose his or her identity to the IRS.  However, after signing its QI Agreement, Deutsche Bank Suisse continued to service certain U.S. customers without disclosing their identity to the IRS and without regard for the impact of U.S. criminal law on that decision.

Prior to October 2008, Deutsche Bank Suisse’s position was that it could service a U.S. client without reporting the U.S. taxpayer’s interest in the account to the IRS so long as it prohibited the accountholder from trading in U.S. securities or the account was an account nominally structured in the name of a non-U.S. entity accompanied by an IRS Form W-8BEN or equivalent bank document. In the latter circumstances, U.S. clients, with the assistance of their external advisors, would create an entity, such as a Liechtenstein foundation, Panamanian corporation or British Virgin Islands corporation, and pay a fee to third parties to act as corporate directors. Those third parties, at the direction of the U.S. client, would then open a bank account at Deutsche Bank Suisse in the name of the entity or transfer funds from a pre- existing account from another bank. Deutsche Bank Suisse employees provided prospective U.S. clients with referrals to external advisors who could assist with the creation and management of such an entity. In some instances, Deutsche Bank Suisse made insufficient efforts to determine whether such an entity was valid for U.S. tax purposes.

Deutsche Bank Suisse maintained and serviced accounts beneficially owned by U.S. taxpayers that were held by entities created in countries such as Liechtenstein, Liberia, Panama and the British Virgin Islands, some of which were operated by the U.S. beneficial owners in violation of corporate governance provisions.  In certain cases involving a non-U.S. entity, Deutsche Bank Suisse was aware that a U.S. client was the true beneficial owner of the account. Despite this, Deutsche Bank Suisse would sometimes obtain from the entity’s directors a Form W-8BEN or equivalent bank document that falsely declared that the beneficial owner was not a U.S. taxpayer. In some of these cases, Deutsche Bank Suisse permitted the accounts to trade in U.S. securities without reporting account earnings or transmitting withholding taxes to the IRS, as required by the QI Agreement.

Deutsche Bank Suisse has cooperated fully with the department during its participation in the Swiss Bank Program.  Deutsche Bank Suisse conducted an internal investigation that included interviews of relationship managers and members of management; review of account files; review of emails; and review of applicable policies, procedures and compliance training materials.  Deutsche Bank Suisse provided a comprehensive and detailed in-person presentation to the department, with accompanying documentation, regarding the findings of its internal investigation and how it structured, operated and supervised its cross-border business. Deutsche Bank Suisse assisted and agreed to continue to assist U.S. authorities in preparing treaty requests to the Swiss competent authority for account records of U.S. clients, including by identifying accounts that may meet the standard for information exchange under an applicable treaty. On a rolling basis and prior to the execution of its non-prosecution agreement, Deutsche Bank Suisse also provided aggregate and account-level information regarding U.S.-related accounts that were closed since Aug. 1, 2008.

Since Aug. 1, 2008, Deutsche Bank Suisse had 1,072 U.S.-related accounts with an aggregate maximum value of approximately $7.65 billion.  Deutsche Bank Suisse will pay a penalty of $31.026 million.         

In accordance with the terms of the Swiss Bank Program, Deutsche Bank Suisse mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. 

https://lawprofessors.typepad.com/intfinlaw/2015/12/deutsche-bank-suisse-pays-31m-penalty-for-complicity-of-clients-tax-evasion-.html

| Permalink

Comments

Post a comment