Non-Prosecution Agreement Allows Swiss Bank BNP Paribas To Pay $59.8 Million And Avoid Charges On Aiding Tax Evasion

Posted On Monday, November 30, 2015
By: John A. Schwab

On November 19, the Department of Justice announced a non-prosecution agreement requiring BNP Paribas, a Switzerland-based financial institution, to pay $59.8 million to avoid prosecution for allegations that it helped American taxpayers avoid paying U.S. taxes.  In the agreement, BNP Paribas admitted that it opened and maintained accounts for U.S. taxpayers under the names of non-U.S. corporations, foundations, trusts, or other legal entities, thus allowing American taxpayers to conceal their ownership of the accounts.  There were a total of 760 U.S. accounts worth approximately $1.2 billion.  Of that amount, $650 million was held by “sham entities” in offshore locations such as the British Virgin Islands, Panama, Lichtenstein, and Liberia.

The non-prosecution agreement was reached through DOJ’s Swiss Bank Program announced in August 2013, which allows Swiss banks to resolve potential criminal charges if they disclose the commission of tax-related criminal offenses in connection with undeclared bank accounts.  However, Swiss banks already under criminal investigation related to undeclared accounts were excluded from the program.  

A Swiss bank which DOJ deems to have met the requirements of the Swiss Bank Program, which includes a detailed disclosure of the bank’s involvement, is eligible to enter into a non-prosecution agreement.  The bank is required to disclose cross-border activities, provide detailed information for accounts in which U.S. taxpayers have an interest, provide detailed information as to other banks to which funds were transferred, and pay penalties.  A total of 55 Swiss banks entered into the program and collectively paid $532 million.

This announcement is the most recent of significant legal developments in 2015 for BNP Paribas, which, in May, was sentenced in the Southern District of New York for illegally processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian and Cuban entities subject to U.S. economic sanctions.  The bank was sentenced to a five-year term of probation, and ordered to forfeit $8,833,600,000, and pay a $140,000,000 fine.  The sentence represented the first time that a financial institution was convicted and sentenced for a violation of U.S. economic sanctions, and it was the largest financial penalty ever imposed in a criminal case.

The DOJ-BNP Paribas non-prosecution can be found here.