Swiss bank fined $765m for role in US tax dodge

NEW YORK • Julius Baer Group has agreed to pay US$547 million (S$765 million) to avoid US prosecution and admitted it helped American clients hide billions of dollars in assets from the tax authorities while coaching its bankers on how to avoid detection.

Switzerland's third-largest lender made admissions of wrongdoing and US prosecutors agreed to drop a conspiracy charge in three years if the bank abides by the terms of the deal agreed on Thursday.

As part of the accord, Julius Baer admitted conspiring since the 1990s to help clients cheat the Internal Revenue Service (IRS). It gave its bankers a memo called "US Clients Do's and Don'ts" to coach them on how to avoid scrutiny when they visited American clients with assets not declared to the IRS.

"When asked by officer what will you do while in the USA, say business and of course some leisure, trying to take some time to enjoy your beautiful country," according a statement of facts by the bank.

Bankers were told to only use mobile phones registered in Switzerland and avoid using hotel phones when speaking with clients. They were advised to buy telephone calling cards and use them when calling abroad, which would allow use of "practically any phone with no specific link left behind".

Julius Baer follows its larger Swiss rivals UBS Group and Credit Suisse Group in resolving US tax probes. UBS agreed in 2009 to pay US$780 million, while Credit Suisse reached a US$2.6 billion deal in 2014. 

As the UBS investigation intensified, Julius Baer opened 247 undeclared accounts from that bank in 2008, with one executive calling it "a big opportunity for us hopefully", according to the agreement.

The bank, which once had US$4.7 billion in US assets, made US$219 million in revenue and US$87 million in profit on undeclared accounts from 2001 through 2011, said US prosecutor Preet Bharara.

"Julius Baer not only turned a blind eye to tax avoiders, but actually conspired with them to break the law," Mr Bharara said.

In late 2009, Julius Baer decided to approach the US authorities proactively and report their activities, but Swiss regulators requested that it not do so "in order not to prejudice the Swiss government in any bilateral negotiations with the US government on tax-related matters", according to the pact.

When it finally approached the US authorities, the bank took "exemplary actions" to come clean, including conducting a "swift and robust internal investigation".

The plea agreement calculated an US$81 million penalty, which was an 85 per cent reduction of the bank's possible payment. The rest of the payments are considered restitution and forfeiture.

"The settlement ends a long period of uncertainty for us and all our stakeholders," CEO Boris Collardi said in a statement.


A version of this article appeared in the print edition of The Straits Times on February 06, 2016, with the headline 'Swiss bank fined $765m for role in US tax dodge'. Print Edition | Subscribe