Swiss bank hid clients’ assets for tax evasion

Some maintained their accounts because of fears related to the collapse of the banking system Others in the gold and cash client base show strong indicia of the concealment of assets

DREYFUS Sons & Co has operated for two centuries as a private Swiss bank, catering to Jewish clients who wanted to hide assets from the Nazis during the 1930s and the Second World War.

More recently, it helped US clients hide assets from the Internal Revenue Service (IRS) by concealing their true ownership with offshore entities and by storing gold and cash in a segregated area of its vaults, according to a nonprosecution agreement released on Tuesday that the bank reached with the US justice department.

Dreyfus avoided US prosecution by agreeing to pay $24.2m and admitting it “did not implement strict enough controls” to ensure that its American clients paid their taxes, the agreement says.

George Clarke, a lawyer for Dreyfus, declined to comment on the accord.

The US announced two other pacts on Tuesday, with Credit Agricole’s Swiss unit, which agreed to pay $99.2m, and Baumann & Cie, which is to pay $7.7m.

Anne-Sophie Gentil, a spokeswoman for Credit Agricole, did not immediately respond to an e-mail seeking comment on its pact. Keith Krakaur, a lawyer for Baumann, did not immediately return a call.

In all, 64 Swiss banks have agreed to pay almost $742m in penalties this year. But while many of those accords spell out classic Swiss tactics, such as numbered accounts and off-the-shelf corporations to help clients cheat the IRS, none detail the use of gold storage like the Dreyfus pact.

Two decades ago, Dreyfus agreed to serve as a custodian for gold and cash held by a Swiss-based British Virgin Islands entity — 315 accounts valued at $440m, in all.

Some of those accounts should have been disclosed to the IRS and were not, until clients came forward to tell the tax agency about them to avoid prosecution, according to the bank’s statement of facts in the agreement.

“Although some of the gold and cash client base maintained their accounts because of fears related to the collapse of the banking system,” others “show strong indicia of the concealment of assets”, the agreement says.

The British Virgin Islands entity had an account at the bank, with US customers holding subaccounts, according to the pact.

The subaccounts were often held in the names of offshore trusts, foundations or corporations.

Dreyfus was founded in 1813 in Basel by a Jewish immigrant from France. It grew to 7,000 accounts valued at 18-billion Swiss francs ($18.2bn) in 2013, the accord says. Of those, 855 were US accounts valued at $1.76bn.

Some of those accounts were held in the name of Panamanian corporations, a practice that began after the Second World War because Jewish clients wanted to “protect their assets for reasons of personal safety”, while also hiding them from governments, according to the pact. Of the US accounts, 33 were held in the name of Panamanian entities, with bank employees serving as directors for most.

One such account disguised weekly cheques ranging from $3,900 to $4,100 to a US woman, or her relatives, from 1998 to 2013.