Swiss private bank Banque Pictet et Cie SA entered into a deferred prosecution agreement with the Department of Justice, admitting to conspiring with U.S. taxpayers and others to hide more than $5.6 billion in 1,637 secret bank accounts and to conceal the income generated in those accounts from the IRS. As part of the resolution, Banque Pictet entered into a deferred prosecution agreement and agreed to pay approximately $122.9 million to the U.S. Treasury. This case is another of a series of cases by the Justice Department in connection with its investigations since 2008 into facilitation of offshore U.S. tax evasion by foreign banks.
The Pictet Group was founded in 1805 and is a privately held Swiss financial institution headquartered in Geneva.
As of Dec. 31, 2014, the Pictet Group had approximately 3,800 employees in various locations, primarily in Switzerland, but also in Luxembourg, Hong Kong, Singapore and the Bahamas. The Pictet Group provided offshore corporation and trust formation and administration services to certain U.S. taxpayers, From 2008 to 2014, the Pictet Group served approximately 3,736 private accounts that had U.S. taxpayers as beneficial owners, with the aggregate value of the accounts at approximately $20 billion.
From 2008 through 2014, the Pictet Group assisted certain U.S. taxpayer-clients with Pictet Group accounts in evading their U.S. tax obligations and otherwise hiding undeclared accounts from the IRS. The Pictet Group assisted U.S. taxpayer-clients with evading their U.S. taxes by opening and maintaining undeclared accounts for U.S. taxpayer-clients at the Pictet Group, either directly or through external asset managers. The Pictet Group also maintained accounts of certain U.S. taxpayer-clients within the Pictet Group in a manner that allowed the U.S. taxpayer-clients to further conceal their undeclared accounts from the IRS. The Pictet Group and certain of its employees knew or should have known that some of their U.S. taxpayer-clients were evading U.S. taxes. In every instance, managing partners approved the opening of new private client relationships and were informed of the closing of U.S. taxpayer-clients’ accounts, which included some undeclared accounts.
The Pictet Group used a variety of means to assist U.S. taxpayer-clients in concealing their undeclared accounts, including by:
- forming or administering offshore entities in whose name the Pictet Group opened and maintained accounts, some of which were undeclared, for U.S. taxpayer-clients;
- opening and maintaining undeclared accounts in the names of offshore entities formed by others for U.S. taxpayer-clients;
- opening and maintaining Private Placement Life Insurance policy accounts, also called insurance wrappers, held in the name of insurance companies but beneficially owned by U.S. taxpayers and improperly managed or funded through undeclared accounts at the Pictet Group;
- transferring 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, thus assisting U.S. taxpayer-clients in continuing to maintain undeclared funds offshore;
- providing traditional Swiss banking products such as hold-mail account services, where account-related mail is held at the bank rather than sent to the client, and coded or numbered accounts and
- accepting IRS Forms W-8BEN[3] or Pictet Group’s substitute forms that the group knew or should have known falsely stated or implied under penalty of perjury that offshore entities beneficially owned the assets in the undeclared accounts.
The $122.9 million Banque Pictet agreed to pay to the U.S. Treasury pursuant to the deferred prosecution agreement consists of (i) $52,164,201 to the United States, which represents gross fees (not profits) that the bank earned on its undeclared accounts between 2008 and 2014; (ii) $31,844,192 in restitution to the IRS, which represents the unpaid taxes resulting from Banque Pictet’s participation in the conspiracy and (iii) a $38,950,998 penalty. In addition to the payment, Banque Pictet also agrees under the deferred prosecution agreement to accept responsibility for its conduct by stipulating to the accuracy of an extensive statement of facts. Banque Pictet further agreed to refrain from all future criminal conduct, implement remedial measures and cooperate fully with further investigations into hidden bank accounts. Specifically, the Bank is required to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding U.S.-related accounts. The Bank is also required to disclose information consistent with the Justice Department’s Swiss Bank Program relating to accounts closed between Jan. 1, 2008, and Dec. 31, 2022. The agreements provide no protection from criminal or civil prosecution for any individuals. If Banque Pictet continues to comply with its agreement, the United States has agreed to defer prosecution of Banque Pictet for a period of three years, after which time the United States will seek to dismiss the charge against Banque Pictet.