Swiss Life and Three Subsidiaries Agree to Pay Justice Department More Than $77 Million for Conspiracy with U.S. Taxpayers to Hide Assets and Income
In the run-up to the deadline for filing federal taxes, the Justice Department has a well-established practice of bringing tax-related enforcement cases against crooked tax preparers, fraudsters and corporate entities as an important reminder on the importance of tax compliance.
For years, the Justice Department struggled to bring Swiss banks to the enforcement table and eventually was successful in building cooperation in enforcement matters. It was no easy journey – DOJ prosecutors had to bring several major criminal prosecutions against Swiss banks to get them to the table.
Continuing along this line, DOJ recently announced a settlement with Swiss Life and three subsidiaries. DOJ entered into a three-year deferred prosecution agreement (DPA) in exchange for a payment of $77.3 million. Swiss Life admitted to conspiring with U.S. taxpayers to conceal from the IRS more than $1.452 billion in offshore insurance policies, including more than 1600 insurance wrapper policies and related policy investment accounts in banks around the world.
Under the DPA, Swiss Life agreed to enhance remedial measures and cooperate fully with further investigations into hidden insurance policies and related policy investment accounts. Swiss Life was awarded a 50 percent discount in recognition of its cooperation.
Swiss Life is the largest Swiss life insurance company. Swiss Life and its subsidiaries sought out and offered their services to U.S. taxpayers to assist them in evading U.S. tax laws. Swiss Life offered private placement life insurance policies and related policy investment accounts to U.S. customers and provided services that concealed the policies and assets from the IRS. In fact, Swiss Life sought additional business in the face of U.S. aggressive enforcement efforts against Swiss banks. As part of the cooperation deal, Swiss Life will assist the IRS in identifying U.S. tax evaders.
From 2005 to 2014, Swiss Life maintained approximately 1,608 Private Placement Life Insurance (“PPLI”) policies. The PPLI Carriers’ policies and administration of those policies is referred to as “insurance wrappers.” Beginning in 2008, the PPLI Carriers knew that Swiss banks were terminating relationships with U.S. clients in response to increasing offshore tax enforcement efforts by U.S. prosecutors. To take advantage of this situation, Swiss Life aggressively pursued increased business by onboarding U.S. clients who were terminating relationships with Swiss banks. Because Swiss Life would be identified as the owner of the policy investment accounts, rather than the U.S. policyholder and/or ultimate beneficial owner of the assets, the insurance wrapper policies were used by unscrupulous U.S. taxpayers to hide undeclared assets and income and to evade taxes. Swiss Life grew its PPLI business and earned fees on those policies. Members of management of the PPLI Business Unit knew about and authorized the onboarding of U.S. clients without regard to whether they were declared or undeclared.
To conceal these activities, Swiss Life relied on offshore law firms and intermediaries to fund ot terminate PPLI policies through asset transfers to and from a third party account associated with the policy holder. Swiss Life assisted U.S. taxpayers by obscuring true ownership of the policies and placing the policy in the name of a foreign relative.
Some PPLI policies were issued by Swiss Life and involved transfers of physical gold, other precious metals and gemstones, in order to avoid detection by U.S. authorities. The PPLI Carriers allowed policyholders to designate a foreign representative to receive policy documents and custodian account statements. Swiss Life often structured investments in accounts designed to convert prohibited funds into usable funds once the U.S. statute of limitations had expired.
In awarding a 50 percent discount, DOJ cited the fact that Swiss Life conducted a robust internal investigation, supplied client-related data, facilitated the acquisition by the Justice Department of information relating to custodian banks, asset managers, and other entities and individuals related to Switzerland, Liechtenstein, and Singapore, and otherwise meaningfully assisted the Justice Department’s cross-border tax enforcement efforts.
In addition, Swiss Life conducted extensive outreach to current and former U.S. clients to confirm historical tax compliance, and to encourage disclosure to the IRS when policyholders’ historical tax compliance issues had not yet been resolved. Swiss Life further implemented remedial measures to protect against the use of its services for tax evasion in the future.