EFG Reaches $30 Million Deal for Helping Clients Evade U.S. Tax

(Bloomberg) -- EFG Bank AG and a related company will pay almost $30 million to settle allegations they helped Americans evade taxes through conduct that included flying Swiss private bankers to the U.S. and avoiding the postal service and e-mail.

The agreement by EFG Bank and EFG Bank European Financial Group SA, Geneva marks the 58th of its kind, raising the total collected from Swiss banks by the U.S. Justice Department to more than $600 million. It follows last month’s deal by Deutsche Bank AG’s Swiss unit to pay $31 million, the third-largest penalty.

The settlements are part of a U.S. program begun in 2013 to help stem tax evasion. The agreement, which allows the bank to avoid prosecution, requires it to cooperate and prove it has controls to avoid future misconduct, the Justice Department said Thursday in a statement.



Holding Mail

At its peak, EFG held $1.58 billion in funds for 919 U.S.- related accounts, with more than one-third of them using services such as “hold mail” instead of having statements sent to them, the U.S. said. EFG mitigated its penalty by encouraging its U.S. clients to come into compliance.

The agreement “is positive for the business, removes a major source of uncertainty and will enable senior management to devote more of their time to delivering profitable growth,” EFG said in a statement.

The fine was larger than the $10.8 million it had expected, the bank said. It blamed some clients who took actions “inconsistent with the information they had provided” to the bank. Keith Gapp, an EFG spokesman in Zurich, declined to comment further.

EFG’s private bankers flew to the U.S. for meetings in states as far-flung as Arizona and Washington, where they worked through U.S. lawyers and accountants, the government said.
It tallied at least 72 U.S. business trips from 2005 to 2013 by seven private bankers. One relied on a model for doing business with American clients that included two U.S. lawyers, one U.S. accountant and one Swiss fiduciary company.

One of the U.S. lawyers advised the banker to use faxes rather than e-mail to discuss U.S. clients, and also told him not to bring a computer with him to the U.S.
Best Buy Computer

The EFG private banker responded that next time he wouldn’t bring a computer, the government said in its statement. “I will then buy me one at Best Buy and leave it there for use when I am traveling. So I never will carry a computer over the border,” he said, according to the statement.

At least three members of the bank’s senior management knew that this private banker -- who had 86 percent of the total assets he managed in 102 U.S.-related accounts -- was focused on American clients, the Justice Department said.

Instead of closing U.S. accounts, EFG helped clients continue to evade U.S. taxes by transferring their funds to places including Guernsey, Monaco, the Cayman Islands, the United Arab Emirates and Luxembourg, according to the agreement.

The bank used external firms to create offshore structures in the British Virgin Islands, Panama and Liechtenstein, and held two versions of filings -- one showing only the offshore entity, and the other showing who the true, underlying U.S. account holder was, the U.S. said.

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