Lombard Odier admits cash and gold withdrawals cheated US IRS

Newark, New Jersey/Manhattan: Large cash and gold withdrawals was one way Bank Lombard Odier & Co allowed US clients to sever a paper trail on their assets and cheat the Internal Revenue Service, the Swiss lender admitted, agreeing to pay $99.8 million (Dh366 million) to avoid prosecution.

That penalty is the second-largest paid under a program to help the US clamp down on tax evasion through Swiss banks. Total penalties have reached more than $1.1 billion as banks have revealed how they helped clients hide money and where the assets went. DZ Privatbank (Schweiz) AG will also pay almost $7.5 million under accords released Thursday.

The US has struck 75 such non-prosecution agreements this year, with the tempo and dollar amount increasing in recent weeks as it rushes to finish.

Geneva-based Lombard Odier, founded in 1796, had 1,121 US accounts with $4.45 billion in assets from 2008 through 2014, according to the agreement, announced Thursday.

Undeclared assets

The bank adopted a policy in 2008 to force US clients to disclose undeclared assets to the IRS or face account closures. However, the policy authorised large cash or gold withdrawals, donations to US relatives or charitable institutions, resulting in further wrongdoing, according to the statement.

In 2009 alone, the bank processed 14 cash withdrawals of more than $1 million each for clients closing 11 accounts, according to the non-prosecution agreement. One client closed an account by withdrawing more than $3 million in gold, the bank admitted.

“These withdrawals of cash and precious metals enabled US persons to sever the paper trail for their assets and further conceal their income and assets from US authorities,” according to the agreement.

The bank also closed at least 12 US accounts worth $15.7 million with “fictitious donations” to other accounts at the bank, Lombard Odier admitted.

Exit policies

The bank “did not adequately address the exit policies” when it made presentations to the Justice Department about its program, according to the statement.

While the bank admitted the fictitious donations and large cash withdrawals were “shortcomings” in the implementation of its policy, it said orally and in writing that relationship managers encouraged US clients to close their accounts using traceable methods. The bank also said structured donations were policy violations.

In fact, the written policy “authorised cash or gold withdrawals, or donations to non-U. S. relatives or charitable institutions,” the bank admitted.

Lombard Odier was aware that a relationship manager with an equity interest in the bank “may have engaged in significant misconduct,” but didn’t disclose that to the Justice Department for several months, according to the agreement.

Undisclosed lawyer

The bank also knew that an unnamed US lawyer had referred US accounts, but didn’t disclose his identity to the Justice Department until last month, according to the accord.

Lombard Odier has set aside funds to cover the settlement amount, which does not affect its capital ratios, the bank said in a statement.