Washington: A New York court has ordered private Swiss bank, Wegelin & Co, to pay USD 58 million on charges of hiding USD 1.5 billion in secret accounts and the income generated in those accounts from the US government.
This is for the first time that a foreign bank in the US has been indicted for facilitating tax evasion by US taxpayers and the first guilty plea and sentencing of such a bank.
With the April 2012 forfeiture of more than USD 16.2 million from the US correspondent bank account of Wegelin & Co - a Swiss private bank and the oldest in the country- the US has recovered USD 74 million.
In January, Wegelin had pleaded guilty to one count of conspiracy to defraud Internal Revenue Service (IRS), filing false federal income tax returns and evading federal income taxes before US District Judge Jed S Rakoff.
"Wegelin has now paid a steep price for aiding and abetting tax fraud that should be heeded by other banks, bankers, and advisers who engage in the same conduct," said the US Attorney Preet Bharara on Monday.
"US taxpayers with undeclared accounts - wherever those accounts may be - should know that their bank may be next, and they should pay what they owe the IRS before we come find them," Bharara said.
According to the indictment, Wegelin had no branches outside Switzerland, but it directly accessed the US banking system through a correspondent bank account that it held at UBS AG in Stamford, Connecticut.
As of December 2010, Wegelin had approximately USD 25 billion in assets under management.
From 2002 through 2011, Wegelin conspired with various US taxpayers and others, to hide from the IRS the existence of bank accounts held at Wegelin, and the income generated in those secret accounts, a statement said.
Wegelin carried out this scheme through client advisers and others.
In 2008 and 2009, Wegelin opened and serviced dozens of new undeclared accounts for US taxpayers in an effort to capture clients lost by UBS in the wake of widespread news reports that UBS was being investigated by US authorities for helping US taxpayers evade taxes and hide assets in Swiss bank accounts, it added.
By mid-2008, UBS had stopped servicing undeclared accounts for US taxpayers, and Wegelin took a number of steps to capitalise on the opportunity to assist US taxpayers hide their assets from the US government.
According to the indictment, Wegelin opened and serviced undeclared accounts for US taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong and other jurisdictions for the purpose of concealing some clients' identities from the IRS.
It accepted documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were beneficially owned by US taxpayers, and making the false documents part of Wegelin's client files.
It also permitted certain US taxpayer-clients to open and maintain undeclared accounts at Wegelin using code names and numbers to minimise references to the actual names of the US taxpayers on Swiss bank documents.
It issued checks drawn on, and executing wire transfers through, its US correspondent bank account for the benefit of US taxpayers with undeclared accounts at Wegelin and at least two other Swiss banks.
In doing so, Wegelin sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than USD 10,000 to reduce the risk that the IRS would detect the undeclared accounts, the indictment alleged.
US taxpayers are required to report the existence of any foreign bank account on their federal income tax returns if it holds more than USD 10,000 at any time during a given year, as well as any income it earns.