Several Swiss Banks Signed Up For US Program To Resolve Tax Dispute , Many More Expected By End Of Year

Several Swiss Banks Signed Up For US Program To Resolve Tax Dispute , Many More Expected By End Of Year

Six Swiss banks - Bank Coop, Migros Bank, Linth Bank; Valiant Holding; Vontobel Holding AG; and Berner Kantonalbank - have announced their participation in the US program (see below), under which they may avoid criminal prosecutions in return for supplying the US Department of Justice with client information, plus financial penalties of up to 50% of assets they managed on behalf of US citizens.

To sign on to the US program, the rest of Switzerland's banks only have until December 31, 2013.

Moreover, the Swiss Financial Market Supervisory Authority (FINMA) has imposed additional reporting requirements on all Swiss Bank to inform of their intentions to apply for the US Program s until December 16, 2013.

On August 29, 2013, Switzerland and the United States announced the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks or the US Program.

The consequences of the US Program on the Swiss banks depend mainly on the bank’s classification into one of the following four categories.

  1. Category 1 Banks are banks which are already under formal criminal investigations. These 14 banks, including UBS, Credit Suisse and Julius Baer, cannot benefit from the US Program.
  2. Category 2 Banks have reasons to believe that they have may have breached US tax laws. These banks may request a Non-Prosecution Agreement (“NPA”) by filing a letter of intent by 31 December 2013 at the latest. Under this NPA they will have to provide details of their activities in the US and pay fines but will, in exchange, not be prosecuted for any tax-related offences.
  3. Category 3 Banks have no reasons to believe that they have violated US tax law, though these banks must prove it.
  4. Category 4 Banks must prove their qualification as Local Foreign Financial Institution under FATCA (i.e. Swiss banks with at least 98% local client base).
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