On August 29, the DOJ announced a new program designed to encourage Swiss banks to cooperate with its ongoing tax evasion investigations. At the same time the DOJ released a joint statement with the Swiss Federal Department of Finance providing Switzerland's agreement to encourage banks to participate in the new program.
The program will offer participating banks Non-Prosecution Agreements in exchange for their agreement to provide information upon request, including information concerning transferred funds to non-participating bank's accounts in which U.S. taxpayers have an interest. Under the program, participating banks will also have to disclose their cross-border activities, close accounts of non-compliant account holders, and agree to pay substantial penalties. The penalties will be equal to 20% of the maximum aggregate dollar value of all non-disclosed U.S. accounts held on August 1, 2008, 30% for accounts opened between August 1, 2008 and the end of February 2009, and increases 50% for accounts opened in March 2009 or later. Banks are only eligible to participate in the new program if they are not currently under criminal investigation for their Swiss banking activities. Banks seeking to establish their status will be able to provide an internal investigation report by an independent examiner, or demonstrate that they meet a set of criteria for compliance under the Foreign Account Tax Compliance Act. In exchange for this information the DOJ will provide them with non-target letters.
This new program with Swiss authorities represents the latest efforts by US authorities to work with their international counterparts to secure compliance with United States law. Using atypical US enforcement strategy, the program relies heavily upon obtaining the cooperation from alleged offending institutions and in return offers rewards in the form of non-prosecution agreements and non-target letters. Although the penalties under the program are significant (ranging from 20% to 50% of the aggregate value of non-compliant accounts) the penalties issued to companies charged with offenses outside of this program have been even more severe.