Back in 2008, increasing offshore tax enforcement by the U.S. drove some Swiss banks to reevaluate or even terminate relationships with American clients. Apparently, certain personnel of the Swiss Life PPLI unit saw this as an opportunity to pick up customers who still wanted to maintain their assets abroad – sometimes to evade U.S. taxation.
Swiss Life therefore set up over $1.452 billion in offshore insurance policies and over 1,600 insurance “wrapper” policies in banks around the world. Swiss Life would be the ultimate beneficial owner of these assets and would be identified as the owner of the policies’ investment accounts. This made these policies ideal for U.S. taxpayers seeking to hide their income and assets and thereby evade taxation, according to Accounting Today.
Approximately 1,608 private placement life insurance policies were maintained between 2005 and 2014 by Swiss Life and affiliated insurance carriers in Luxembourg, Liechtenstein and Singapore. These policies were administered in a way that made it easy to avoid taxes and reporting requirements.
Moreover, Swiss Life and its affiliates helped dodge U.S. tax authorities and hide the U.S. nexus of the assets by “parking” the assets in the insurance policies until they thought the statute of limitations had run out.
Now, Swiss Life Holding AG and related companies have been caught out. The entities were charged with conspiracy to help U.S. taxpayers and others conceal over $1.452 billion in assets from the IRS. The entities have entered into a deferred prosecution agreement for criminal misconduct. And, they have agreed to pay over $77 million, including over $16 million in restitution, to the U.S. Treasury and the IRS.
The deferred prosecution agreement requires Swiss Life to refrain from any future criminal misconduct, improve its remedial measures to prevent such activities, and continue to fully cooperate with all investigations into the hidden insurance policies and related investments. If they abide by these terms, the charges will be dismissed in three years.
Do you have offshore holdings?
If you have substantial holdings abroad, you must comply with a series of notification requirements and pay all U.S. taxes that are due on these holdings. The U.S. government is cracking down on tax evasion and has agreements with many countries that will allow it to identify holdings by U.S. taxpayers.
If you are not certain you have complied with all the regulations, you could face serious consequences if the IRS discovers the lack. Talk to an experienced tax attorney right away.