Bank Coop AG Reaches Resolution Under The DOJ Swiss Bank Program

On December 10, 2015 the United States Department of Justice announced that it had reached a resolution with Bank Coop AG (Bank Coop) under the Swiss Bank Program. 

Founded in 1927, Bank Coop is a Swiss retail bank headquartered in Basel, Switzerland that operates 32 branches throughout the country.  Bank Coop has been accused of knowingly providing a number of banking services to U.S. clients that assisted clients in hiding undeclared income and assets, such as numbered accounts, travel cash cards and mail-hold agreements.  Additionally, after August 1, 2008, Bank Coop created bank accounts for U.S. residents who were transferring assets that the bank knew were likely to be undeclared from other Swiss banks, such as UBS and Credit Suisse AG.

Bank Coop’s activities also included processing substantial cash withdrawals associated with the closing of certain U.S.–related accounts.  For instance, one client visited Bank Coop three times in February 2012 telling the bank that he was going to close the account because he was concerned about recent developments with Swiss bank secrecy and disclosure requests by U.S. and EU authorities.  The client eventually closed the account and withdrew all remaining sums in June 2012.

From the period April 2010 through March 2011, a client requested that Bank Coop purchase three kilograms of gold in separate transactions.  Two of the gold kilograms were stored in the client’s Bank Coop safety deposit box and the third was taken by the client’s daughter.  In September 2012, the bank told the client that his account would be closed due to his U.S. residence.  In response, the client requested Bank Coop to sell the gold stored in the safety deposit box and credit the proceeds to his Bank Coop account.  In October 2012, the client requested Bank Coop to close the account and forward a “crossed” check in the amount of approximately $335,000 to a Swiss law firm.

Bank Coop also established and serviced accounts held in the names of non-U.S. entities, knowing that the true beneficial owners of the accounts were actually U.S. taxpayers.  For example, even though Bank Coop knew that a U.S. person was the true beneficial owner of an account held by a Panama entity, Bank Coop accepted a false IRS Form W-8BEN from the entities’ directors, declaring that the beneficial owner was not a U.S. taxpayer.  Moreover, the director who signed the IRS form also served as the director of the external asset manager who introduced the client to Bank Coop.

In 2001, Bank Coop entered into a Qualified Intermediary (QI) Agreement with the IRS.  Pursuant to this QI Agreement, Bank Coop was required to secure authorization from an accountholder to report the accountholder’s identity to the Internal Revenue Service when the accountholder sought to trade in U.S. securities and avoid U.S. tax withholding requirements. 

However, Bank Coop did not comply with the terms of the QI Agreement – the financial institution continued to service certain U.S. customers without revealing their identities to the IRS.  In one instance, a relationship manager traveled to the U.S. and obtained a “Declaration of U.S. Taxable Persons,” in which the accountholder declared that she did not give Bank Coop authorization to disclose her identity to U.S. tax authorities and instructed the bank to sell her U.S. securities. 

Bank Coop Avoids Criminal Prosecution via the Swiss Bank Program

In an effort to avoid a criminal investigation and likely prosecution, Bank Coop decided to take advantage of the DOJ’s Swiss Bank Program.  This Swiss Bank Program allows eligible Swiss financial institutions to resolve criminal liabilities and receive reduced fines in exchange for cooperating with DOJ investigations and proceedings, including providing detailed information about U.S. taxpayers’ offshore accounts to federal authorities.  According to the terms of the Bank Coop non-prosecution agreement (NPA), Bank Coop was required to pay a penalty in the amount of $3.223 million along with meeting all other program conditions.

If you have concerns about an undeclared offshore account and would like to discuss your options with a skilled Virginia international tax attorney, contact Thorn Law Group today.