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U.S.-Swiss Tax Deal Impacts U.S. Account Holders and Dozens of Swiss Financial Institutions

August 29, 2013, Caplin & Drysdale

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FOR IMMEDIATE RELEASE

CONTACT:      Mark D. Allison – 212.379.6060
                         Mark E. Matthews – 202.862.5082
                         Scott D. Michel  – 202.862.5030
                         Cono R. Namorato – 202.862.5090

Washington, D.C.—August 29, 2013:  The Tax Division of the U.S. Department of Justice today announced an agreement with Switzerland that would permit all but a few Swiss banks to avoid criminal prosecution by paying substantial fines and turning over information on accounts held by American clients.  The agreements would not protect either the bank personnel or the U.S. clients of these banks from prosecution and/or fines.

The monetary penalties are based on a percentage of unreported American accounts at the participating bank.  The formula escalates depending on when the accounts were opened, to reflect the Justice Department's focus on banks that courted "leavers," Americans who transferred funds from one bank to another to avoid ramped up enforcement efforts that began in 2008.  Mark Matthews of Caplin & Drysdale, a former IRS and DOJ senior official, explained, "The U.S. believes that a number of Swiss banks marketed themselves to customers leaving banks under investigation, and the penalty structure in this agreement is meant to sanction such efforts.  Having said that, for any bank that wishes to avoid criminal prosecution, this agreement presents a clear and attractive opportunity to obtain peace with the U.S."

The agreement's disclosure framework provides an opportunity for U.S. prosecutors to obtain, reasonably promptly, the names of account holders at any bank that accepts the Justice Department's framework.  The banks will initially provide all pertinent specific account information, except the identity of the U.S. account holder, but this data "will then give a roadmap for the U.S. to file treaty requests requiring the banks to disclose account holder names, which will likely happen soon afterwards" said Scott Michel, another Caplin partner and the firm's President.  The agreement requires the participating financial institution to cooperate with any treaty request, and the Swiss government has agreed to treat such requests expeditiously.

The agreement provides that financial institutions may reduce their penalties for accounts that participate in the IRS's Offshore Voluntary Disclosure Program.  Cono Namorato, Caplin's senior criminal tax partner and also a former high level IRS and DOJ official, said "we expect that there will still be a large number of Americans with unreported accounts at Swiss banks whose directors will find this deal attractive as a means to reduce their own penalties.  Affected account holders should in any event seriously consider immediately undertaking a voluntary disclosure to protect themselves."  

Caplin & Drysdale, with offices in Washington and New York, has handled over 1,000 voluntary disclosures by U.S. taxpayers with unreported accounts held around the world.  The firm has also provided advice to foreign financial institutions and represented dozens of taxpayers under audit or criminal investigation arising from unreported foreign accounts.  For more information, please contact Mark D. Allison at 212.379.6060, Mark E. Matthews at 202.862.5082, Scott D. Michel at 202.862.5030, or Cono R. Namorato at 202.862.5090.

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