Swiss Bank Admits Cash and Gold Withdrawals Cheated IRS

  • Lombard Odier to pay $99.8 million to settle tax case
  • Swiss firms have agreed to $1.1 billion in penalties this year

Large cash and gold withdrawals were one way Bank Lombard Odier & Co allowed U.S. clients to sever a paper trail on their assets and cheat the Internal Revenue Service, the Swiss lender admitted, agreeing to pay $99.8 million to avoid prosecution.

That penalty is the second-largest paid under a program to help the U.S. clamp down on tax evasion through Swiss banks. Total penalties have reached more than $1.1 billion as banks have revealed how they helped clients hide money and where the assets went. DZ Privatbank (Schweiz) AG will also pay almost $7.5 million under accords released Thursday.

The U.S. has struck 75 such non-prosecution agreements this year, with the tempo and dollar amount increasing in recent weeks as it rushes to finish.

Geneva-based Lombard Odier, founded in 1796, had 1,121 U.S. accounts with $4.45 billion in assets from 2008 through 2014, according to the agreement, announced Thursday.

Undeclared Assets

The bank adopted a policy in 2008 to force U.S. clients to disclose undeclared assets to the IRS or face account closures. However, the policy authorized large cash or gold withdrawals, donations to U.S. relatives or charitable institutions, resulting in further wrongdoing, according to the statement.

In 2009 alone, the bank processed 14 cash withdrawals of more than $1 million each for clients closing 11 accounts, according to the non-prosecution agreement. One client closed an account by withdrawing more than $3 million in gold, the bank admitted.

“These withdrawals of cash and precious metals enabled U.S. persons to sever the paper trail for their assets and further conceal their income and assets from U.S. authorities,” according to the agreement.

The bank also closed at least 12 U.S. accounts worth $15.7 million with “fictitious donations” to other accounts at the bank, Lombard Odier admitted.

Exit Policies

The bank “did not adequately address the exit policies” when it made presentations to the Justice Department about its program, according to the statement.

While the bank admitted the fictitious donations and large cash withdrawals were “shortcomings” in the implementation of its policy, it said orally and in writing that relationship managers encouraged U.S. clients to close their accounts using traceable methods. The bank also said structured donations were policy violations.

In fact, the written policy “authorized cash or gold withdrawals, or donations to non-U.S. relatives or charitable institutions,” the bank admitted.

Lombard Odier was aware that a relationship manager with an equity interest in the bank “may have engaged in significant misconduct,” but didn’t disclose that to the Justice Department for several months, according to the agreement.

Undisclosed Lawyer

The bank also knew that an unnamed U.S. lawyer had referred U.S. accounts, but didn’t disclose his identity to the Justice Department until last month, according to the accord.

Lombard Odier has set aside funds to cover the settlement amount, which does not affect its capital ratios, the bank said in a statement.

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