Dive Brief:

• Banque Pictet, a Swiss private bank and asset manager, has agreed to pay $122.9 million to the U.S. Treasury in a deferred prosecution agreement for conspiring with U.S. taxpayers to hide more than $5.6 billion in secret bank accounts, the Department of Justice announced Monday.
• Between 2008 and 2014, Pictet agreed to help taxpayers use 1,637 accounts in Switzerland and elsewhere to hide assets and income from the Internal Revenue Service, according to the DOJ. The U.S. taxpayer clients evaded roughly $50.6 million in U.S. taxes, the DOJ said.
• The DOJ will defer prosecution for three years and dismiss the case if the bank complies with certain conditions, including implementing remedial measures to protect against future tax evasion.

Dive Insight:

“Today, Banque Pictet et Cie admitted to actively helping U.S. taxpayers use coded accounts, foreign trusts and entities, nominee beneficiaries and other deceits to conceal their income and assets abroad,” Acting Deputy Assistant Attorney General Stuart M. Goldberg said in a statement.

The bank used a “variety of means” to assist U.S. taxpayer clients in concealing those accounts, including opening and maintaining undeclared accounts on offshore entities’ names formed by others for U.S. clients, the DOJ said.

Pictet also opened and maintained insurance wrappers held in insurance companies’ names but owned by U.S. taxpayers, according to the DOJ. The lender helped to transfer funds from “undeclared U.S. taxpayer-client accounts to accounts nominally held by non-U.S. clients but still controlled by U.S. taxpayer-clients via fictitious donations,” the DOJ said.

Pictet admitted that it assisted 108 U.S. clients with offshore entities and let them make organized withdrawals by check in amounts less than $10,000 to avoid detection, Bloomberg reported.

However, the Swiss bank voluntarily disclosed the accounts to the DOJ in 2014 and ousted the principal private banker associated with the case, according to Bloomberg. Pictet cooperated with the department, conducted interviews with over a dozen current and former employees, and made more than 20 presentations to the DOJ, according to the wire service.

The disgorgement of funds includes roughly $52 million in fees the bank earned on its undeclared accounts, over $31 million in restitution to the IRS, and approximately $39 million in penalties, the DOJ noted.

Additionally, the Swiss lender agreed to refrain from future criminal conduct, implement remedial measures and cooperate with further investigations into hidden bank accounts.

“Pictet is pleased to have resolved this matter and will continue to take steps to ensure its clients meet their tax obligations,” the bank said in a statement to Bloomberg.

The Pictet penalty is one of a series of cases the DOJ has investigated involving U.S. tax evasion by foreign banks since 2008. The crackdown began when UBS admitted assisting thousands of Americans in evading taxes and avoiding prosecution by paying $780 million. Credit Suisse pleaded guilty in 2014, paying $2.6 billion, and Julius Baer paid $547 million to avoid prosecution — both admitting they enabled clients to conceal billions in assets, according to Bloomberg.

In 2016, the DOJ terminated a disclosure program under which 80 Swiss banks paid $1.36 billion in penalties for aiding U.S. tax evasion. These banks held approximately $50 billion in U.S.-based assets across 35,096 accounts between 2008 and 2013, per Bloomberg data.

“This case should provide a clear message to others who try to hide their assets and income offshore. Our special agents are experts in following the money, and they are the best at uncovering schemes that try to defraud the U.S. tax system,” IRS Criminal Investigation Chief Jim Lee said in a statement. “Offshore tax evasion is a priority for IRS Criminal Investigation, and today’s deferred prosecution agreement with Bank Pictet collects more than $120 million owed to the U.S. government.”