Swiss banks are starting to reveal how exactly they have been able to assist wealthy Americans in avoiding taxes thanks to a forgiveness program from the Justice Department.
Such tactics used to be kept in secret, but after banks in Switzerland signed amnesty agreements with the United States Justice Department, they have been mandated to expose their secrets regarding how they help customers hide assets from taxation.
Meanwhile, American citizens keeping money in Swiss banks are realizing this, and they are starting to relocate their money to other countries, such as Singapore and Israel.
The top tax prosecutor Caroline Ciraolo says, “The money is moving out of Switzerland to a variety of jurisdictions. We’re following leads and following the money, wherever that leads us.”
The amnesty program in Switzerland is part of a major attempt at curbing tax evasion. These efforts largely grew in intensity after 2009 when the largest Swiss bank paid $780 million to avoid prosecution. Meanwhile, the United States initiated criminal investigations at 14 other banks as well.
In order to get Swiss banks to expose their tricks, the United States promised to not prosecute any Swiss bank that revealed their tax-evasion methods starting in 2013.
So far in 2015, 41 banks have paid a combined $355 million in penalties. In exchange, none of these banks have been prosecuted. These penalties are smaller than what the banks had anticipated.
However, the program functions in a unique way. The more revelations the Swiss banks make about their techniques, the less money they have to pay the American government.
Meanwhile another 40 banks are also expected to enter the program this year.
With banks in Switzerland largely being milked for their secrets, American investigations are now largely focusing their efforts on countries where the money was relocated, such as Singapore.
A major tactic used by the Swiss banks involved transferring the money of their clients to other accounts both in Switzerland and internationally. Much of the money was transferred to obscure places where investors wouldn’t think to look.
The IRS is also gathering information from American taxpayers who revealed their offshore accounts. Since 2009, more than $7 billion has been paid back by nearly 50,000 taxpayers.
Switzerland has a long history of being an ideal place for banking. The country made it a crime in 1934 to reveal information regarding their clients. Bank accounts in Switzerland typically feature numbers rather than the names of the clients, and banks typically hold mail to avoid creating paper trails.
Swiss banks have also been known to assist clients in making cash withdrawals in order to avoid currency reporting requirements mandated by the United States. Other Swiss banks will convert the assets of a client into gold, which cannot be taxed as easily.
With the rush against Swiss banks, some Americans have converted their assets into foreign company holdings in order to hide their money. Some representatives from foreign banks and companies have even pressured wealthy Americans to allow them to hide their money by taking them out for fancy dinners and popular sporting events.
Since the amnesty program began in 2009, 106 Swiss banks have participated. Representatives from the Justice Department say that they have been able to obtain a large amount of valuable information thanks to the program.