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Swiss bank reserves $24 million to pay U.S. tax fine

In May, the U.S. Justice Department reported reaching a plea agreement with Credit Suisse AG. The bank pleaded guilty for helping U.S. taxpayers evade taxes. Under the plea agreement, the bank will pay a penalty of $2.6 billion. The plea came after years of investigations.

As this big settlement made headlines, more than 100 Swiss banks quietly signed onto a Justice Department voluntary disclosure program. These banks will avoid indictments for their part in helping American clients hide assets offshore. The banks must pay fines and give information on their wealth management businesses to the Internal Revenue Service.

Swiss bank EFG International AG recently said that it put aside 21.4 million Swiss francs or $24 million to cover expected penalties related to a U.S. tax evasion probe.

Penalties for those who entered the program before the end of last year will range from 20 to 50 percent of hidden account assets. Banks can minimize penalties when clients disclose offshore accounts to the IRS.

The timing and exact size of the penalty EFG will pay are not “set in stone.” The bank hopes to settle with the Justice Department before the end of the year. The company also reported that the U.S. program-related “legal and professional expenses” had already reached more $9 million this year. 

Even with the potential penalty, the bank increased the amount of new money under management from last year. As a result, it hired an additional 21 private bankers in the first six months of this year.

Most Swiss banks will likely weather the Justice Department investigation. When the IRS obtains information on individual U.S. taxpayers who willfully utilized offshore accounts to evade taxes, penalties are not just civil, but often involve incarceration.

Source: Bloomberg, "Swiss Bank EFG Sets Aside $24 Million for U.S. Tax Fine," Giles Broom, July 23, 2014.

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