The private banking group said it has cooperated extensively with US authorities. In the period covered by the US action, Pictet helped US taxpayers to use coded accounts, foreign trusts and entitites, nominee beneficiaries and other ploys.
Geneva-headquartered Pictet has agreed to pay $122.9 million as part of a US deferred prosecution agreement for conspiring to help US taxpayers hide assets and income in offshore accounts.
Pictet, one of the country’s oldest banks, enabled US taxpayers, and others, to hide more than $5.6 billion in 1,637 secret bank accounts in Switzerland and elsewhere and to conceal the income generated in those accounts from the IRS, according to a statement on Monday from the US Attorney's Office, Southern District of New York.
“As it has admitted today, Banque Pictet knowingly conspired to conceal from the IRS the income generated by accounts which held more than $5.6 billion,” US Attorney Damian Williams said in the statement.
At the end of December 2014, the Pictet Group’s private banking division managed or held custody of about $165 billion in assets under management. From 2008 to 2014, Pictet served around 3,736 private accounts that had US taxpayers as beneficial owners, whose aggregate maximum AuM, including declared assets, was around $20 billion.
The case is one of several that the US Department of Justice has brought in connection with its investigations since 2008 into how foreign banks enabled US citizens to evade tax. A raft of lenders have entered settlements. Swiss bank secrecy, once an impenetrable wall, is dead as a cross-border barrier, although it endures domestically within the Alpine state.
“This resolution follows Pictet’s extensive cooperation with the US authorities, in full compliance with Swiss law. The DOJ recognises this substantial assistance in the resolution agreement,” the bank said in a statement. “The agreement acknowledges that Pictet began evaluating and enhancing its policies and practices for conducting business with US taxpayer clients in 2008, before it became public that the DOJ was investigating similar issues at another Swiss bank. It also recognises that the Group then took additional steps, beyond those required by US law, to promote the tax compliance of its US taxpayer clients.”
Acting Deputy Assistant Attorney General Stuart M Goldberg said: “Today, Banque Pictet et Cie admitted to actively helping US taxpayers use coded accounts, foreign trusts and entities, nominee beneficiaries and other deceits to conceal their income and assets abroad.”
“For this criminal conduct the bank will be paying nearly $122.9 million in restitution, disgorgement of fees and a financial penalty, and is required to fully cooperate with investigations relating to these secret accounts,” Goldberg said.
From 2008 to 2014, the Pictet Group’s private banking division was operated by the group’s following banking entities: the Swiss bank Banque Pictet & Cie SA; Pictet & Cie (Europe) SA, headquartered in Luxembourg; Bank Pictet & Cie (Asia) Ltd in Singapore; and the Bahamian bank, Pictet Bank & Trust Ltd. The Pictet Group provided offshore corporation and trust formation and administration services to certain US taxpayers, first through the Estate Planning and Trust Services unit and later through a wholly owned subsidiary called Rhone Trust and Fiduciary Services SA (Rhone).
“Though the Pictet Group adopted early measures to confirm that US clients complied with US law, from 2008 through 2014, the Pictet Group assisted certain US taxpayer-clients with Pictet Group accounts in evading their US tax obligations and otherwise hiding undeclared accounts from the IRS, the US Attorney’s Office said.
Pictet used a variety of techniques to help certain clients conceal undeclared accounts:
-- Forming or administering offshore entities in whose name the Pictet Group opened and maintained accounts, some of which were undeclared, for US taxpayer-clients;
-- Opening and maintaining undeclared accounts in the names of offshore entities formed by others for US 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 US taxpayers and improperly managed or funded through undeclared accounts at the Pictet Group;
-- Transferring funds from undeclared US taxpayer-client accounts to accounts nominally held by non-US clients but still controlled by US taxpayer-clients via fictitious donations; and
-- 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 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.
Scores of Swiss financial institutions have signed non-prosecution agreements and paid fines under a US Department of Justice programme, agreed in 2013, under which institutions were given the option to say if they were or were not at risk of having breached US tax laws. Separately, a new global regime of information sharing, known as the Common Reporting Standard, is now in force, although by a supreme irony, the US is not a signatory to it. The CRS has far wider scope than the US FATCA Act.