Department of Justice Announces Agreement with Liechtenstein Bank to Pay $23.8 Million to Resolve Criminal Tax Investigation
Bank, with Assistance of Liechtenstein Government, Produced Account Files of More Than 200 Non-compliant U.s. Taxpayers
Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, Preet Bharara, the U.S. Attorney for the Southern District of New York and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (IRS-CI), announced today that Liechtensteinische Landesbank AG, a bank based in Vaduz, Liechtenstein (LLB-Vaduz), has agreed to pay more than $23.8 million to the United States and entered into a non-prosecution agreement (NPA) with the U.S. Attorney’s Office for the Southern District of New York. The NPA provides that LLB-Vaduz will not be criminally prosecuted for opening and maintaining undeclared bank accounts for U.S. taxpayers from 2001 through 2011, when LLB-Vaduz assisted a significant number of U.S. taxpayers in evading their U.S. tax obligations, filing false federal tax returns with the IRS and otherwise hiding accounts held at LLB-Vaduz from the IRS. The NPA requires LLB-Vaduz to forfeit $16,316,000, representing the total gross revenues that it earned in maintaining these undeclared accounts, and to pay $7,525,542 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by LLB-Vaduz’s clients. The NPA applies only to LLB-Vaduz and not to any of its subsidiaries or any individuals. LLB-Vaduz has decided to close its wholly-owned Swiss subsidiary, Liechtensteinische Landesbank (Switzerland) Ltd. and has also decided to sell another wholly-owned subsidiary, Jura Trust AG.
Assistant Attorney General Kathryn Keneally stated “this non-prosecution agreement addresses the past wrongful conduct of LLB-Vaduz in allowing U.S. taxpayers to evade their legal obligations through the use of undisclosed Liechtenstein bank accounts, while also acknowledging the extraordinary efforts of the bank in bringing about significant changes in Liechtenstein law. As a result of new Liechtenstein legislation, U.S. taxpayers who thought that they had obtained the benefit of Liechtenstein’s tax secrecy laws have learned that their bank files were turned over on the request of the Department of Justice.”
“With this agreement, one of Liechtenstein’s most important banks has put an era behind it. Today’s agreement with Liechtensteinische Landesbank AG reflects the unprecedented nature of the bank’s cooperation, and serves as another reminder for U.S. tax cheats who mistakenly believe that their offshore bank will never turn over their account files to U.S. authorities. To them we say, you can hide, but not forever”, said U.S. Attorney Preet Bharara.
“In 2008, Liechtensteinische Landesbank AG began requiring all U.S. taxpayers with accounts at LLB-Vaduz to declare their income. In addition, Liechtenstein’s Parliament amended their national law on tax matters to make easier the identification to the United States of non-compliant taxpayers. Today’s action sends a strong message to those Americans who hide their true income from the IRS. It's time to come clean and pay your fair share of taxes like law-abiding citizens do every day”, said IRS-CI Chief Weber.
The NPA recognizes that, in 2008, before the IRS and the U.S. Attorney’s Office began the investigation, LLB-Vaduz voluntarily implemented a series of remedial measures to stop assisting undeclared U.S. taxpayers in evading federal income taxes. The NPA further recognizes LLB-Vaduz’s extraordinary cooperation in the form of its support and assistance in 2012 to obtain a change in law by the Liechtenstein Parliament that permitted the Department of Justice to request and obtain the bank files of non-compliant U.S. taxpayers from Liechtenstein without having to identify the taxpayers by name (the “2012 Law”).
Pursuant to such a request by the Department of Justice, Liechtenstein transferred to the Department of Justice more than 200 files of U.S. taxpayers who held undeclared accounts at LLB-Vaduz, directly or through sham corporations, foundations or trusts (“structures”). In addition, pursuant to the 2012 Law, the Department of Justice has submitted a second request to the Liechtenstein government for records relating to various Liechtenstein firms that provided trust administration and other fiduciary services that enabled U.S. taxpayers to hold undeclared accounts through structures at banks in Liechtenstein, Switzerland and elsewhere.
As part of the NPA, LLB-Vaduz admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, LLB-Vaduz admitted that it knew certain U.S. taxpayers were maintaining undeclared accounts at LLB-Vaduz in order to evade their U.S. tax obligations, in violation of U.S. law. In addition, LLB-Vaduz admitted that it knew of the high probability that other U.S. taxpayers who held undeclared accounts did so for the same unlawful purpose because significant numbers of U.S. taxpayers employed structures to hold their accounts, instructed LLB-Vaduz to use code names or numbers to refer to them on account statements and other bank documents, instructed LLB-Vaduz not to mail such documents to them in the United States, and instructed LLB-Vaduz not to disclose their identity to the IRS, among other things. At the end of 2006, LLB-Vaduz held more than $340 million of undeclared assets on behalf of U.S. taxpayers in more than 900 accounts.
As part of the NPA, LLB-Vaduz has agreed to forfeit $16,316,000 to the United States, representing LLB-Vaduz’s total gross revenues from services that it provided to undeclared U.S. taxpayers from 2001 through 2011. In connection with this forfeiture, LLB-Vaduz has agreed not to contest a civil forfeiture action filed by the United States. That action was filed on July 30, 2013, in U.S. District Court for the Southern District of New York and assigned to U.S. District Judge Katherine P. Failla.
The U.S. Attorney’s Office entered into the NPA based on factors including:
· LLB-Vaduz’s voluntary implementation of various remedial measures beginning in June 2008, before the investigation of its conduct began;
· LLB-Vaduz’s voluntary cooperation with this Office and the government of Liechtenstein after becoming aware of this Office’s investigation;
· LLB-Vaduz’s willingness to continue to cooperate with this Office and the IRS to the extent permitted by applicable law;
· LLB-Vaduz’s substantial support for the 2012 Law, which has already permitted the production to the Department of Justice of more than 200 account files of U.S. taxpayers who held undeclared accounts at LLB-Vaduz;
· LLB-Vaduz’s representation, based on an investigation by external counsel, that the misconduct under investigation did not, and does not, extend beyond that described in the statement of facts;
The NPA requires LLB-Vaduz to continue to cooperate with the United States for at least three years from the date of the agreement. The NPA applies only to LLB-Vaduz and does not apply to any of its subsidiaries, including its Swiss subsidiary,or to any individuals. In the event that LLB-Vaduz violates the NPA, the U.S. Attorney’s Office may prosecute LLB-Vaduz.
U.S. Attorney Bharara thanked the IRS for its outstanding work in the investigation of this matter and the Tax Division of the Department of Justice for its assistance in the investigation. Bharara also thanked the Liechtenstein Tax Authority and the Liechtenstein Public Prosecutor’s Office for their assistance in this matter.
This investigation is being overseen by the U.S. Attorney’s Office’s Complex Frauds Unit. Assistant U.S. Attorneys David B. Massey, Daniel W. Levy and Jason H. Cowley are in charge of the matter.