The Department of Justice has Received 106 Requests from Swiss Banks to Enter its Swiss Bank Program to Avoid Prosecution

"Anyone who thinks they can hide money in Switzerland is fooling themselves," because of support received from Switzerland, said Kathryn Keneally, assistant attorney general for the Justice Department Tax Division, speaking at the January 25 session of the Civil & Criminal Tax Penalties Committee.

The Justice Department's Swiss bank program, announced in August, provides Swiss banks an opportunity to come forward, cooperate, disclose their illegal conduct, and be eligible for non-prosecution agreements -- or in egregious cases, deferred prosecution agreements.

The DOJ has received 106 letters of intent through its Swiss bank program, according to Keneally. None of the 14 banks currently subject to criminal investigation is included in this number. However, the number of 106 banks is subject to caveats about eligibility.

"We have not determined that they are all banks, or are Swiss banks. We may have some entities that are trying to get in the program but don't quite fit in the definition," Keneally said. She does not expect 106 non-prosecution or deferred prosecution agreements.

"From our point of view, every bank that comes forward under the program is a new source of information for us," Keneally said. "Given the information we expect to receive from these banks about closed accounts and where the money went, I would think that anybody anywhere in the world that has an unreported offshore bank account will be well advised to come forward."

Keneally isn't surprised that a significant number of the letters of intent indicate that the banks are still early in their internal investigations and may try to become category 3 banks. Category 3 is reserved for banks that did not violate United States law.

The program says the banks can reduce their penalties if they can show they encouraged their account holders into the voluntary disclosure program, and after that encouragement, the disclosures came in. But if account holders volunteer information on their own and their banks failed to encourage compliance, the banks will not get credit, Keneally said.

"We are very appreciative of the support received from Switzerland," added Keneally, saying that the program provides a mechanism to allow all Swiss banks to find a resolution, "to take the cloud off of the Swiss financial industry, which is a globally important financial center."

""The goal of that program is to make offshore bank accounts unattractive as a means of tax evasion. And I think we will be at it for as long as it takes," she said. "This is not a trend but fits into what we should be doing."

"We have a lot of avenues for getting information now, some of them visible and some of them not visible. Anyone who thinks they can hide their money in Switzerland or elsewhere is full of themselves and has been for a long time," Keneally said.

What about banks in other countries? Keneally said that DOJ is proceeding country by country. Information can be had more easily from other countries with U.S. treaties and tax information exchange agreements.

OVDP

"We are better off with a voluntarily compliant taxpayer than another criminal tax prosecution," Keneally said. Account holders who received an account closing letter from their banks can still come into the offshore voluntary disclosure program (OVDP), she noted.