A recent Corporate Counsel article warns that the DOJ, emboldened by its success in obtaining $3.3 billion from two Swiss banks to resolve criminal charges, now has U.S. banks squarely in their sights.
In the course of resolving charges against two Swiss-based banks, the DOJ announced in August 2013 a "Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks" ("Program"). The Program puts a procedure in place for Swiss banks to obtain amnesty from prosecution in exchange for making extensive, highly detailed disclosure to the DOJ. While the actual names of account owners are not required, Corporate Counsel reports that Swiss banks must provide the following information relating to the transfer of funds in and out of Swiss account for the past six years on a monthly basis, including:
- whether funds were deposited or withdrawn in cash;
- whether funds were transferred through an intermediary (including, but not limited to, an asset manager, financial adviser, trustee, fiduciary, nominee, attorney, accountant or other third party functioning in a similar capacity) and the name and function of any such intermediary;
- identification of any financial institution and domicile of any financial institution that transferred into or received funds from the account; and
- any country to or from which funds were transferred.
The DOJ says that more than 100 Swiss banks are participating in the Program. As such, a significant amount of information is expected to be gleaned. Additionally, more information will be culled by the Foreign Account Tax Compliance Act ("FACTA"), which requires foreign financial institutions to disclose to the U.S. IRS information about their U.S. related accounts, or be subject to withholding on all U.S.-source income of 30 percent. FATCA went online July 1, 2014, and disclosures will begin in 2016.
So what actions can and should a U.S. bank take now? As part of its due diligence, a bank should replicate the information the DOJ is receiving from Swiss banks by tracing the flow of money between itself and Swiss banks since 2008. If a bank uncovers any potential issues, it should immediately seek legal counsel so it can get out in front of the issue and formulate a strategic response – before the DOJ's inevitable knock at the door.