Swiss Life and three of its subsidiaries have entered into a deferred prosecution agreement with the US department of justice (DoJ) for criminal misconduct and agreed to pay a fine of more than $77m (£55m, €63m).
The companies; which include the Liechtenstein, Luxembourg and Singapore operations, were charged with “conspiring with US taxpayers and others to conceal from the Internal Revenue Service (IRS) more than $1.45bn in offshore insurance policies”.
This includes over 1,600 insurance wrapper policies, and related policy investment accounts in banks around the world and the income generated in these accounts.
Findings
According to the DoJ, the Swiss Life companies maintained approximately 1,608 private placement life insurance (PPLI) policies. The insurance wrappers and the related investment accounts “were often done in a manner to assist US taxpayers in evading US taxes and reporting requirements and concealing the ownership of offshore assets”.
US-related PPLI policies were “funded or terminated through asset transfers from/to an account maintained by a third party associated with the policyholder, such as an offshore law firm or intermediary”.
Swiss Life PPLI personnel assisted US taxpayers in establishing and maintaining policies in the name of a foreign relative “with the effect of obscuring the US nexus of the assets used to fund the policy or to repatriate the US taxpayer’s undeclared assets through a sham death payout”.
Some US-related PPLI policies issued by Swiss Life Liechtenstein “involved transfers of physical gold, other precious metals, or precious gemstones into or out of the policy investment account, presumably for the purpose of avoiding detection by US authorities”.
The PPLI carriers allowed policyholders to designate an authorised recipient – typically the policyholder’s asset manager or other foreign representative – to receive policy documents and custodian investment account statements, rather than having those documents sent directly to the policyholder.
A number of Swiss Life Liechtenstein staff “promoted the use of Swiss Life products to turn US taxpayers’ undeclared – or so-called ‘black’ – money into so-called ‘white’ money by parking the funds in a Swiss Life insurance policy until the clock had run on the perceived statute of limitations for tax offences”.
Corporate premium bank accounts were “also misused as a transitory account to help conceal the movement of US clients’ funds”.
Agreement
The deferred prosecution agreement sees the firms accept responsibility for their criminal conduct and requires them to “refrain from all future criminal conduct, enhance remedial measures, and continue to cooperate fully with further investigations into hidden insurance policies and related policy investment accounts”, the DoJ said.
As part of the resolution, the Swiss Life companies have agreed to pay approximately $77.3m to the US treasury, which includes restitution, forfeiture of all gross fees, and a penalty.
This breaks down into:
- $16.3m in restitution to the IRS, which represents the approximate unpaid taxes resulting from its entities’ participation in the crime;
- $35.8m forfeited to the US, which represents the approximate gross fees that the Swiss Life entities earned on the insurance policies and related policy investment accounts between 2005 and 2014.
- Plus a penalty of $25.2m.
The penalty takes into consideration that Swiss Life conducted a “robust internal investigation” and “conducted extensive outreach to current and former US 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 also “implemented remedial measures to protect against the use of its services for tax evasion in the future”.
If the firms abide by all of the terms of the agreement, the US government will defer prosecution on the information for three years and then seek to dismiss the charge.
Cooperation
Audrey Strauss, Manhattan US attorney, said: “As they admit, Swiss Life and its subsidiaries sought out and offered their services to US taxpayers to help them become US tax evaders.
“The Swiss Life entities offered private placement life insurance policies and related policy investment accounts to US customers and provided services that concealed the policies and other assets from the IRS.
“Indeed, the Swiss Life entities saw US authorities’ stepped-up offshore tax enforcement as an opportunity to pitch themselves to tax-evading US customers as an alternative to Swiss banks. Under the terms of today’s agreement, Swiss Life will turn over more than $77m and be required to continue to cooperate with the US in identifying US tax evaders.”
As part of the agreement, the Swiss Life entities are required to continue to cooperate fully with ongoing investigations and disclose any information they may later uncover regarding US-related insurance policies and related policy investment accounts.
