Tag Archives: tax evasion

Why the Rich Love Swiss Military Bunkers

camouflaged bunker Sufers, Switzerland. image from wikipedia

Deep in the Swiss Alps, next to an old airstrip suitable for landing Gulfstream and Falcon jets, is a vast bunker that holds what may be one of the world’s largest stashes of gold. The entrance, protected by a guard in a bulletproof vest, is a small metal door set into a granite mountain face at the end of a narrow country lane. Behind two farther doors sits a 3.5-ton metal portal that opens only after a code is entered and an iris scan and a facial-recognition screen are performed. A maze of tunnels once used by Swiss armed forces lies within.

The owner of this gold vault wants to remain anonymous for fear of compromising security, and he worries that even disclosing the name of his company might lead thieves his way…

Demand for gold storage has risen since the 2008 financial crisis. Many of the wealthy see owning gold as a hedge against the insecurity of banks and a reasonable investment at a time when markets are volatile and bank accounts and low-risk bonds pay almost no yield. It may also be a way to avoid the increasing scrutiny of tax authorities. In high-profile cases, U.S., French, and German prosecutors have gone after citizens of those countries with undeclared Swiss bank accounts.

Swiss storage operations such as these don’t have the same obligation that Swiss banks do to report suspicious transactions to federal regulators. Americans aren’t required under the U.S. Foreign Account Tax Compliance Act to declare gold stored outside financial institutions.
Of the roughly 1,000 former military bunkers still in existence across Switzerland, a few hundred have been sold in recent years, and about 10 are now storage sites holding gold as well as computer data, according to the Swiss defense department.

Few match the opulence of the airstrip setup, whose owner claims to run the largest store of gold for private clients—and the seventh-largest gold vault in the world. Near the runway sits the VIP lounge and a pair of luxurious apartments for clients. The walls of the apartments are lined with aged wood from Polish barns. South African quartzite was chosen for the floors to match the faded gray timber, and the amenities—bathroom mirror, TV screens—can retract into the ceiling, counter, or wall. The owner offers a place for clients to sleep and eat, because “many do not want to leave a paper trail of credit card receipts and passports” at hotels and restaurants…

Some miles away, Dolf Wipfli, the founder and chief executive officer of a different company, Swiss Data Safe, is one of the few operators willing to be interviewed about his business. The gold Swiss Data Safe stores for clients is kept in a mountainside bunker outside the hamlet of Amsteg.

Excerpts from Secret Alpine Gold Vaults Are the New Swiss Bank Accounts, Bloomberg, Sept. 30, 2016

Predator Instinct: tax avoidance in Luxembourg

luxembourg

Antoine Deltour and Raphaël Halet, two ex-employees of PwC, an accounting firm, and Edouard Perrin, a French journalist, had been tried in Luxembourg for their role in leaking documents that revealed sweetheart tax deals the Grand Duchy had offered to dozens of multinationals. ..The whistle-blowers faced up to ten years behind bars. However, the prosecutor—perhaps sensitive to the strong public and, in some places, political support for them abroad—called for suspended sentences of 18 months. In the end the judge handed Messrs Deltour and Halet suspended sentences of 12 months and nine months, respectively. But a conviction is a conviction; Transparency International, an anti-corruption group, called it “appalling”. Mr Perrin, who had published an article that drew on the leaked documents, was acquitted.

The “LuxLeaks” affair has highlighted the role played by certain European Union countries, including Ireland and the Netherlands as well as Luxembourg, in facilitating tax avoidance. Luxembourg is not a typical tax haven levying no or minimal income tax; its statutory rate is 29%. Instead, it is a haven “by administrative practice”, argues Omri Marian of the University of California, Irvine, who has studied LuxLeaks in detail. Luxembourg’s tax authority in effect sold tax-avoidance services to large firms by rubber-stamping opaque arrangements that helped them to cut their tax bills dramatically in both their countries of residence and their countries of operation.]

Excerpt from Tax avoidance: Grand dodgy, Economist, July 2, 2016

How and Where to Get a Secret Account in the USA

South Dakota, quarter---2006, image from wikipedia

After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners. By resisting new global disclosure standards, the U.S. is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.

Rothschild, the centuries-old European financial institution, has opened a trust company in Reno, Nevada a few blocks from the Harrah’s and Eldorado casinos. It is now moving the fortunes of wealthy foreign clients out of offshore havens such as Bermuda, subject to the new international disclosure requirements, and into Rothschild-run trusts in Nevada, which are exempt.  Others are also jumping in: Geneva-based Cisa Trust Co. SA, which advises wealthy Latin Americans, is applying to open in Pierre, S.D., to “serve the needs of our foreign clients,” said John J. Ryan Jr., Cisa’s president.  Trident Trust Co., one of the world’s biggest providers of offshore trusts, moved dozens of accounts out of Switzerland, Grand Cayman, and other locales and into Sioux Falls, S.D., in December, ahead of a Jan. 1 disclosure deadline….

No one expects offshore havens to disappear anytime soon. Swiss banks still hold about $1.9 trillion in assets not reported by account holders in their home countries, … Still, the U.S. is one of the few places left where advisers are actively promoting accounts that will remain secret from overseas authorities….The offices of Rothschild Trust North America LLC aren’t easy to find. They’re on the 12th floor of Porsche’s former North American headquarters building, a few blocks from the casinos. (The U.S. attorney’s office is on the sixth floor.) Yet the lobby directory does not list Rothschild. Instead, visitors must go to the 10th floor, the offices of McDonald Carano Wilson LLP, a politically connected law firm. Several former high-ranking Nevada state officials work there, as well as the owner of some of Reno’s biggest casinos and numerous registered lobbyists. One of the firm’s tax lobbyists is Robert Armstrong, viewed as the state’s top trusts and estates attorney, and a manager of Rothschild Trust North America.

“There’s a lot of people that are going to do it,” said Cripps. “This added layer of privacy is kicking them over the hurdle” to move their assets into the U.S. For wealthy overseas clients, “privacy is huge, especially in countries where there is corruption.”….

Rothschild’s Penney wrote that the U.S. “is effectively the biggest tax haven in the world.” The U.S., he added in language later excised from his prepared remarks, lacks “the resources to enforce foreign tax laws and has little appetite to do so.”….The U.S. failure to sign onto the OECD information-sharing standard is “proving to be a strong driver of growth for our business,” …

In a section originally titled “U.S. Trusts to Preserve Privacy,” he included the hypothetical example of an Internet investor named “Wang, a Hong Kong resident,” originally from the People’s Republic of China, concerned that information about his wealth could be shared with Chinese authorities.  Putting his assets into a Nevada LLC, in turn owned by a Nevada trust, would generate no U.S. tax returns, Penney wrote. Any forms the IRS would receive would result in “no meaningful information to exchange under” agreements between Hong Kong and the U.S., according to Penney’s PowerPoint presentation reviewed by Bloomberg.
Penney offered a disclaimer: At least one government, the U.K., intends to make it a criminal offense for any U.K. firm to facilitate tax evasion.

Excerpt from Jesse Drucker, The World’s Favorite New Tax Haven Is the United States, Bloombert, Jan. 27, 2016

A Ready-Made Vehicle for Dirty Money: Trade

Money-laundering. image from wikipedia

A few years ago American customs investigators uncovered a scheme in which a Colombian cartel used proceeds from drug sales to buy stuffed animals in Los Angeles. By exporting them to Colombia, it was able to bring its ill-gotten gains home, convert them to pesos and get them into the banking system.This is an example of “trade-based money laundering”, the misuse of commerce to get money across borders. Sometimes the aim is to evade taxes, duties or capital controls; often it is to get dirty money into the banking system. International efforts to stamp out money laundering have targeted banks and money-transmitters, and the smuggling of bulk cash.

But as the front door closes, the back door has been left open. Trade is “the next frontier in international money-laundering enforcement,” says John Cassara, who used to work for America’s Treasury department. Adepts include traffickers, terrorists and the tax-evading rich. Some “transfer pricing”—multinationals’ shuffling of revenues to cut their tax bills—probably counts, too. Firms insist that tax arbitrage is legal, and that the fault, if any, lies with disjointed international tax rules. Campaigners counter that many ruses would be banned if governments were less afraid of scaring off mobile capital. Trade is “a ready-made vehicle” for dirty money, says Balesh Kumar of the Enforcement Directorate, an Indian agency that fights economic crime. A 2012 report he helped write for the Asia/Pacific Group on Money Laundering, a regional crime-fighting body, is packed with examples of criminals combining the mispricing of goods with the misuse of trade-finance techniques. Using trade data, Global Financial Integrity (GFI), an NGO, estimates that $950 billion flowed illicitly out of poor countries in 2011, excluding trade in services and fraudulent transfer pricing. Four-fifths was trade-based laundering linked to arms smuggling, drug trafficking, terrorism or public corruption.

The basic technique is misinvoicing. To slip money into a country, undervalue imports or overvalue exports; do the reverse to get it out. A front company for a Mexican cartel might sell $1m-worth of oranges to an American importer while creating paperwork for $3m-worth, giving it cover to send a dirty $2m back home. One group of launderers was reportedly caught exporting plastic buckets that cost $970 each from the Czech Republic to America. To lessen the risk of discovery the deal may be sent via a shell company in a tax haven with strict secrecy rules. This may mean using a specialist “re-invoicing” firm to “buy” the oranges at an inflated price with an invoice to match and charge the importer the true price. The point is to get paperwork to justify an inflated transfer to the seller. Re-invoicers are used by multinationals to shift profits around, which gives them a veneer of respectability, says Brian LeBlanc of GFI—but they also “feed a giant black market in the offshore manipulation of paperwork”…

American authorities have ratcheted up penalties for banks that assist money-launderers, knowingly or not. In 2012 they reached a $1.9 billion settlement with HSBC after concluding that Latin American drug gangs had taken advantage of lax controls at its Mexican subsidiary. And last year they imposed a $102m forfeiture order on a Lebanese bank implicated in a complex scheme involving the export of used cars to West Africa with the proceeds funnelled to Hizbullah, an Islamist group. Alternative remittance systems and currency exchanges, such as the trust-based hawala networks in Asia and the Middle East, and Latin America’s Black Market Peso Exchange (BMPE), offer another route to launder money through trade. ..A recently leaked Turkish prosecutor’s report describes an alleged conspiracy involving Turkish front companies and banks, an Iranian bank and money-exchangers in Dubai. By marking up invoices for food and medicine allowed into Iran—to as much as $240 for a pound of sugar—the scheme gave Iranian banks access to hard currency from Iran’s oil sales that was locked in escrow accounts overseas, to be transferred only for approved transactions…

In the meantime, launderers who curb their greed and invoice goods worth $10 for $9, or $11, will probably continue to get away with it. A dodgy deal is almost impossible to spot if the pricing is only slightly out and you see just one end, says one American investigator. “You can study the slips all day long, and all you see is stuff being imported and exported.”

Excerpts from Trade and money laundering: Uncontained, Economist, May 3, 2014, at 54

Automatic Global Information Sharing in Tax Matters

oecd  may 6, 2014

Forty-seven countries, including the Group of 20 and some prominent tax havens, [adopted a declaration–Declaration on Automatic Exchange
of Information in Tax Matters] on May 6, 2014 that will shake up the sharing of tax information. Under the present system, countries have to file requests with each other for data on suspected cheats…In the future the states will automatically exchange information once a year. This will include bank balances, interest income, dividends and the proceeds of sales, which can be used to assess capital-gains tax…The deal also increases pressure on banks to identify the ultimate owners of shell companies and trusts, behind which tax evaders often hide.

The catalyst for the agreement was America’s Foreign Account Tax Compliance Act (FATCA). The law, passed in 2010, will soon impose stiff penalties on foreign financial firms that fail to declare their American clients. Once America began pushing for automatic declarations, other big countries did the same.

The most eye-catching signatory to the accord is Switzerland, whose banks were at the centre of the scandals that gave rise to FATCA. The world’s most famous offshore wealth-management centre was built on supposedly ironclad bank secrecy, but it has been forced to buckle under international pressure. (The American authorities, for instance, are currently leaning on Credit Suisse to plead guilty to charges of aiding American tax dodgers.) This is momentous: for the Swiss, agreeing to swap client data systematically is the cultural equivalent of Americans giving up guns. Singapore, which has earned a reputation as the Switzerland of the East, is also a party to the deal.  Britain’s offshore satellites, such as Jersey and the Cayman Islands, are grudgingly on board. But it will be harder to corral Panama, Dubai and the havens dotted around the Indian and Pacific Oceans (although blacklisting can be a powerful tool). Until they sign up, the likes of Switzerland and Luxembourg may have an excuse to drag their feet in implementing the new rules.

Still, the pace of change has been remarkable. Global information exchange, unthinkable a decade ago, is within reach. Tax evaders can be ingenious, but their options are narrowing fast.

Tax evasion: The data revolution, Economist, May 10, 2014, at 74

Tax Evaders and Whistleblowers

HSBC Private Bank n London, image from wikipedia

What  Edward Snowden is to mass surveillance, Hervé Falciani is becoming to private banking. In 2008 the now 41-year-old native of Monaco walked out of the Geneva branch of HSBC, where he had worked for three years, clutching five CD-ROMs containing data on thousands of account holders. The theft lobbed a bomb into Europe’s private-banking market, spawning raids and tax-evasion investigations continentwide. In the latest, this week, Belgian agents swooped on the homes of 20 HSBC clients, including some with ties to Antwerp diamond dealers.

Mr Falciani went on the run when the Swiss charged him with data theft. After moving to Spain he was imprisoned, but freed when a judge denied a Swiss extradition request. At one point, he claims, he was kidnapped by Mossad agents who wanted a peek at the clients’ names. He has now taken refuge in France, where the government has offered him protection in return for helping it hunt for tax dodgers.

Several countries have used the data to bring cases against suspected evaders. Revelations that dozens of Greek public figures hid money offshore have magnified the tumult in that country’s politics. Spain and France have fingered hundreds of high-level cheats and retrieved €350m ($610m) in back taxes. Mr Falciani maintains that his CDs provided support for an American probe into weak money-laundering controls at HSBC, which led to a $1.9 billion settlement. HSBC disputes this.

Mr Falciani has said he still fears for his safety, despite round-the-clock protection from three armed guards provided by the French. At least he is not short of work. He has been helping France’s tax authorities develop long-term anti-tax-evasion measures. And he recently became an adviser to a new Spanish political party, Partido X (which, ironically, tries to keep its members anonymous).

He insists his motives have always been pure: to repel Switzerland’s “attack” on other countries’ tax laws and exchequers. HSBC says he is no high-minded whistle-blower. He tried to sell the data at first, the bank contends, and started to work with prosecutors only when he was jailed in Spain. It claims he has data on only 15,000 clients (Mr Falciani says it is eight times that) and that the stolen files contain errors.

Either way, many more tax-shy Europeans have reason to sleep fitfully. Other countries are said to want a look at the data, some of which are yet to be decrypted. When Mr Falciani first made the rounds with his discs, there was little interest. The fiscal strains produced by the euro crisis have changed all that.

Banks and tax evasion: Hervé lifting, Economist, Oct. 19, 2013, at 79

Offshore Tax Evasion: US versus Switzerland

switzerland tax haven

Fearful that other banks could suffer the same fate as Wegelin, a venerable private bank that was indicted in New York in 2012 and put out of business, the Swiss government has been seeking an agreement with America that would allow the industry to pay its way out of trouble in one go. Instead, it has had to make do with one covering banks that are not already under investigation, which excludes some of the country’s biggest institutions.

The deal is cleverly structured. Of Switzerland’s 300 banks, 285 will be able to avoid prosecution if they provide certain information about American clients and their advisers, and pay penalties of 20-50% of the clients’ undeclared account balances, depending on when the account was opened and other factors. Banks that persuade clients to make disclosures before the programme starts will get reduced fines. Banks will not have to take part but the legal risks are daunting for those that don’t, even if they hold little undeclared American money. Those with no foreign clients will have to produce independent reports proving they have nothing to hide if they want a clean bill of health.

One Swiss newspaper likened the deal to “swallowing toads”. Another called it “the start of an organised surrender”. The bankers’ association sees it as a necessary evil: the only way to end legal uncertainty, albeit at a cost that will strain some institutions. Small and medium-sized Swiss private banks are already struggling. In 2012 their average return on equity was 3%; the number of private banks fell by 13, to 148, mostly because of voluntary liquidations. KPMG, a consultancy, expects this to fall by a further 25-30% by 2016 as receding legal threats encourage the return of mergers.

Some of the prospective buyers in any future M&A wave still have to make their peace with the Americans. Excluded from the deal are 14 mostly large banks that have been under investigation for some time, including Credit Suisse and Julius Bär. They will have to settle individually, with fines expected to be steep, some perhaps comparable to the $780m paid by UBS in 2009. These banks are also under pressure from European countries that have suffered tax leakage, including Germany, whose parliament has rejected a deal that would have allowed the Swiss to make regular payments of tax withheld from clients while avoiding having to name names.

Swiss bankers gamely argue that bank secrecy remains intact, pointing out that privacy laws have not been dismantled. But banks are being bullied into providing enough information, short of actual client names, to allow the Americans to make robust “mutual legal assistance” requests that leave Swiss courts with no option but to order banks to provide clients’ personal details. The courts still have some flexibility because America has yet to ratify an amended tax treaty with Switzerland, thanks to blocking tactics by Rand Paul, a senator who argues it would violate Americans’ right to privacy. But this obstacle will eventually be cleared or circumvented.

All of which fuels speculation that Switzerland could lose its crown as the leading offshore financial centre, even though it is still well ahead of fast-growing rivals in Asia. It may find comfort in the fact that the Americans plan to use information harvested from the Swiss— including “leaver lists”, which contain data on account closures and transfers to banks abroad—to go after other jurisdictions. This is part of a “domino effect” strategy, says Jeffrey Neiman, a former federal prosecutor, aimed at forcing tax evaders “so far off the beaten path that they can’t be sure if the pirate waiting to take their money will be there when they return.”

Offshore tax evasion: Swiss finished?, Economist, Sept. 7, 2013, at 72

Multinationals and their Stateless Income

Cross-border corporate taxation is fiendishly complex, the lobbying around it furious. Several recent academic studies show just how pervasive tax avoidance is.  The ability to shift profits to low-tax countries by locating intellectual property in them, which is then licensed to related businesses in high-tax countries, is often assumed to be the preserve of high-tech companies. Yet in “Through a Latte, Darkly”, a new study of how Starbucks has largely avoided paying tax in Britain, Edward Kleinbard of the University of Southern California shows that current tax rules make it easy for all sorts of firms to generate what he calls “stateless income”: profit subject to tax in a jurisdiction that is neither the location of the factors of production that generate the income nor where the parent firm is domiciled. In Starbucks’s case, the firm has in effect turned the process of making an expensive cup of coffee into intellectual property.

In another new paper Harry Grubert of America’s Treasury and Rosanne Altshuler of Rutgers University delve into tax returns by American multinationals in 2006. They examine all the foreign profits held abroad by these firms (because bringing the money home would incur tax). A remarkable 36.8% of these profits were recorded in countries taxing them at a rate of 0-5%, and a further 9.1% were in countries taxing at 5-10%. Given how much more aggressive their tax-avoidance strategies are believed to have become since, it seems likely that the proportion of foreign profits held by American firms in low-tax countries is now well over half. It will take more than fine words in a communiqué to change behaviour when so much is at stake,

Excerpt, The G8 summit: T time, Economist, June 22, 2013, at 72

Not Dead Yet: the Fate of Micro-states in Europe

european microstates map

Armed with a cache of more than 2m documents, leaked from two offshore service providers, a group of investigative journalists has spent the past week publishing articles that lift the lid on thousands of companies and trusts set up in the British Virgin Islands and Cook Islands. The vast client list ranges from Asian politicians to Canadian lawyers—and no fewer than 4,000 Americans. For an industry that peddles secrecy and likes to operate in the shadows it is all rather embarrassing.

Opinions vary on the impact of the leaks. Tax campaigners have cheered it as a “game changer”. Offshore operators counter that most of the activity uncovered is legal. So what if President François Hollande’s former campaign treasurer has a Cayman Islands company? So do thousands of banks and hedge funds. Nevertheless, the affair will add to international scrutiny of tax havens. The pressure on them has grown as governments scramble to plug fiscal holes and push for the systematic exchange of tax information across borders. Germany’s finance minister welcomed the leak, hopeful that it would provide leverage to force more co-operation from “those who have been more reticent” to rein in the havens.

Faced with an end to the days of easy money, offshore jurisdictions are being forced to rethink their strategies. One of the more proactive has been Liechtenstein, nestled between Switzerland and Austria. The principality has long been popular with European tax dodgers, but growth accelerated when Swiss banks hawked Liechtenstein foundations to clients worldwide. This lucrative niche was damaged in 2008 when the former head of Germany’s postal service and many others were caught hiding money in the principality.

Under pressure from Germany and America, Liechtenstein buckled, agreeing to dilute bank secrecy and to exchange tax information. It has since signed many bilateral tax agreements and clamped down on money-laundering. The local financial industry has paid a high price for this. Liechtenstein banks’ client assets declined by almost 30% in the five years to 2011, to SFr110 billion ($118 billion)…

Other offshore centres must also attempt to square this circle. Next may be Luxembourg, a leader in offshore banking and tax avoidance. Bowing to greatly intensified pressure from its neighbours since the Cyprus debacle, the Grand Duchy has dropped its long-held opposition to swapping information about non-resident depositors with other EU countries. Jean-Claude Juncker, the prime minister, said the policy shift was about “following a global movement”, not caving in to German demands. Whether automatic information exchange can be introduced “without great damage”, as he confidently declared, remains to be seen.

Offshore finance: Leaky devils, Economist, April 13, 2013, at 71

Bank Secrecy: Wegelin

image from wikipedia

Wegelin & Co, the oldest Swiss private bank, said on Thursday it would shut its doors permanently after more than 2 1/2 centuries, following its guilty plea to charges of helping wealthy Americans evade taxes through secret accounts.  The plea, in U.S. District Court in Manhattan, marks the death knell for one of Switzerland’s most storied banks, whose original European clients pre-date the American Revolution. It is also potentially a major turning point in a battle by U.S. authorities against Swiss bank secrecy.  A major question was left hanging by the plea: Has the bank turned over, or does it plan to disclose, names of American clients to U.S. authorities?.. Wegelin admitted to charges of conspiracy in helping Americans evade taxes on at least $1.2 billion for nearly a decade. Wegelin agreed to pay $57.8 million to the United States in restitution and fines. Otto Bruderer, a managing partner at the bank, said in court that “Wegelin was aware that this conduct was wrong.”  He said that “from about 2002 through about 2010, Wegelin agreed with certain U.S. taxpayers to evade the U.S. tax obligations of these U.S. taxpayer clients, who filed false tax returns with the IRS.”..

The surprise plea effectively ended the U.S. case against Wegelin, one of the most aggressive bank crackdowns in U.S. history.  “Once the matter is finally concluded, Wegelin will cease to operate as a bank,” Wegelin said in a statement on Thursday from its headquarters in the remote, small town of St. Gallen next to the Appenzell Alps near the German-Austrian border.  But the fate of three Wegelin bankers, indicted in January 2012 on charges later modified to include the bank, remains up in the air. Under criminal procedural rules, the cases of the three bankers – Michael Berlinka, Urs Frei and Roger Keller – are still pending.,

Although Wegelin had about a dozen branches, all in Switzerland, at the time of its indictment, it moved quickly to wind down its business, partly through a sale of its non-U.S. assets to regional Swiss bank Raiffeisen Gruppe.….Wegelin, a partnership of Swiss private bankers, was already a shadow of its former self – it effectively broke itself up following the indictment last year by selling the non-U.S. portion of its business.

Dozens of Swiss bankers and their clients have been indicted in recent years, following a 2009 agreement by UBS AG (UBSN.VX), the largest Swiss bank, to enter into a deferred-prosecution agreement, turn over 4,450 client names and pay a $780 million fine after admitting to criminal wrongdoing in selling tax-evasion services to wealthy Americans…Banks under U.S. criminal investigation in the wider probe include Credit Suisse, which disclosed last July it had received a target letter saying it was under a grand jury investigation…Zurich-based Julius Baer and some cantonal, or regional, banks are also under scrutiny, sources familiar with the probes previously told Reuters. So are UK-based HSBC Holdings (HSBA.L) and three Israeli banks, Hapoalim, Mizrahi-Tefahot Bank Ltd and Bank Leumi (LUMI.TA), sources also said previously.

Under its plea, Wegelin agreed to pay the $20 million in restitution to the IRS as well a civil forfeiture of $15.8 million, the Justice Department said.  Wegelin also agreed to pay an additional $22.05 million fine, the Justice Department said. U.S. District Judge Jed Rakoff, who must approve the monetary penalties, set a hearing in the case for March 4 for sentencing.  Last year, the U.S. government separately seized more than $16 million of Wegelin funds in a UBS AG account in Stamford, Connecticut, via a civil forfeiture complaint.  Since Wegelin has no branches outside Switzerland, it used UBS for correspondent banking services, a standard industry practice, to handle money for U.S.-based clients.  n court papers, Bruderer said that Wegelin “believed it would not be prosecuted in the United States for this conduct because it had no branches or offices in the United States and because of its understanding that it acted in accordance with, and not in violation of, Swiss law and that such conduct was common in the Swiss banking industry.”

The case is U.S. v. Wegelin & Co et al, U.S. District Court, Southern District of New York, No. 12-cr-00002.

Excerpts, Nate Raymond and Lynnley Browning, Swiss bank Wegelin to close after guilty plea, Reuters, Jan. 4, 2013