As we reported in a prior Client Alert, in August the U.S. Department of Justice signed a bank information-sharing agreement with Switzerland. The agreement allows over 100 second tier Swiss banks to avoid or defer prosecution by entering into a non-prosecution agreement (an "NPA") and turning over U.S. account holder information to the U.S. government.
The NPA's basic terms provide that the banks must agree to a penalty structure equal to 20%, 30%, or 50% of the maximum dollar amount of all "U.S. related accounts" held by the bank since August 1, 2008. The penalty varies depending on how active the bank was in opening accounts for U.S. customers since August 1, 2008. Another element of the NPA requires the banks to disclose any information about assets that were transferred from Switzerland or moved to other financial institutions.
The penalty is subject to reduction if the U.S. customer discloses the account(s) to the IRS after being notified by the bank of the IRS's Offshore Voluntary Disclosure Program ("OVDP"). However, the disclosure must occur prior to the bank executing the NPA (i.e., on or before December 31, 2013). As banks notify their U.S. customers of the OVDP to reduce their penalty exposure, customers may find themselves needing quick and reliable U.S. legal help to initiate and complete a voluntary disclosure.