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Risk

Swiss Bank Admits to Helping US Clients Evade Taxes

Zuirch-based 271-year-old private bank Rahn+Bodmer will pay $22 million to settle charges it defrauded the IRS.
By Michael Katz

Rahn+Bodmer, Zurich’s oldest private bank, has admitted to conspiring with its American account holders to help them evade their US tax obligations, file false federal tax returns, and otherwise defraud the IRS.

The bank, which has been in business since 1750, signed a deferred prosecution agreement with the US Justice Department in which it admitted the charges against it were true, promised to provide ongoing assistance to the department, and agreed to pay $22 million in restitution, forfeiture, and penalties. If the bank abides by all the terms of the deal, the US government will defer prosecution on the charge of conspiring to help evade taxes for three years and then seek to dismiss the charge.

According to the charges against Rahn+Bodmer, the conspiracy stretched from 2004 to 2012 during which time “numerous” US clients—who aren’t named—conspired with the bank to hide the existence of accounts they held with the bank, as well as the income earned by the accounts, from the IRS. The bank opened and maintained numbered or so-called “pseudonym accounts” for the clients to ensure that their names would not appear on bank documents relating to their accounts.

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“R+B helped US taxpayer-clients to repatriate funds to the United States in a manner designed to ensure that US authorities did not discover these undeclared accounts,” the Justice Department said in court documents.

Rahn+Bodmer also opened and maintained undeclared accounts held in the name of “sham entities” with no business purpose in order to conceal the clients’ beneficial ownership of the assets. It also allowed US clients and third-party asset managers to make structured withdrawals by checks from undeclared accounts in amounts of less than $10,000 to hide the transactions from US authorities.

Rahn+Bodmer admitted to holding undeclared accounts on behalf of a total of approximately 340 US clients who collectively evaded approximately $16.4 million in taxes between 2004 and 2012. The assets under management the bank held for undeclared US accountholders grew to approximately $550 million at its peak in 2007, from approximately $391 million in 2004. Rahn+Bodmer bankers even made regular visits to the US to solicit, open, and service undeclared accounts of US clients.

The $22 million the bank has agreed to pay includes $4.9 million in restitution to the IRS for the unpaid taxes caused by its participation in the conspiracy; $9.7 million to the US government for gross fees earned on the undeclared accounts; and a $7.4 million penalty.

“Through a years-long scheme, the R+B bank hid the assets of US accountholders to shield them from their tax obligations,” James Lee, chief of the IRS-Criminal Investigation, said in a statement. “Today’s admission and agreement provide a clear path to recovery of funds owed to the US government, and sends a strong signal that offshore accounts are not beyond the reach of special agents.”

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Home > News > Regulation > SEC Seeks Climate Change Disclosure Input
Regulation

SEC Seeks Climate Change Disclosure Input

Acting Chair Allison Herren Lee is calling for SEC staff and the public to evaluate rules on ESG-related disclosures.
By Michael Katz

The Securities and Exchange Commission (SEC) is requesting input from investors, registrants, market participants, and the general public regarding the adequacy and effectiveness of the regulator’s climate change disclosure rules.

SEC Acting Chair Allison Herren Lee said that because of increasing demand for climate change information and questions about current disclosures, she is asking the regulator’s staff to evaluate disclosure rules with a focus on facilitating the disclosure of “consistent, comparable, and reliable information on climate change.” 

In the short time since the Biden administration installed new leadership at the SEC, the regulator has shown a keen interest in the investment community’s relationship with climate change and environmental, social, and governance (ESG) concerns.

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In February, Lee said she was directing the SEC’s Division of Corporation Finance to improve its focus on climate-related disclosure in public company filings.  

“Now more than ever, investors are considering climate-related issues when making their investment decisions,” Lee said in a statement last month. “It is our responsibility to ensure that they have access to material information when planning for their financial future.”

And earlier this month, Lee said climate and ESG-related risks will be a higher priority for the SEC in 2021 than they have been in recent years. She said the SEC’s Division of Examinations is “enhancing its focus on climate and ESG-related risks by examining proxy voting policies and practices,” and added that the SEC is “integrating climate and ESG considerations into the agency’s broader regulatory framework.”

The SEC also recently launched a climate and ESG task force that will develop initiatives to identify ESG-related misconduct and will initially focus on material gaps or misstatements in issuers’ disclosure of climate risks under existing rules.  

Lee said that over the past decade, investor demand for—and company disclosure of —information about climate change risks has grown dramatically.

Last May, the SEC’s Investor Advisory Committee approved recommendations that called on the regulator to update reporting requirements for issuers to include “material, decision-useful ESG disclosure.” And in December, the ESG Subcommittee of the SEC Asset Management Advisory Committee issued a preliminary recommendation that the SEC require the adoption of standards by which corporate issuers disclose material ESG risks.

To aid the SEC staff’s assessment, Lee listed 15 questions to consider as part of the regulator’s climate change disclosure evaluation. She also encouraged commenters to submit empirical data and other information. Some of the questions for consideration include:

  1. How can the SEC best regulate, monitor, review, and guide climate change disclosures in order to provide more consistent, comparable, and reliable information for investors while also providing greater clarity to registrants as to what is expected of them?

  2. What information related to climate risks can be quantified and measured?  How are markets currently using quantified information?

  3. What are the advantages and disadvantages of permitting investors, registrants, and other industry participants to develop disclosure standards mutually agreed by them?

  4. What are the advantages and disadvantages of establishing different climate change reporting standards for different industries?

  5. What are the advantages and disadvantages of rules that incorporate or draw on existing frameworks?

  6. How should any disclosure requirements be updated, improved, augmented, or otherwise changed over time?

  7. What is the best approach for requiring climate-related disclosures? Should disclosures be incorporated into existing rules or should a new regulation devoted entirely to climate risks, opportunities, and impacts be promulgated?

  8. How, if at all, should registrants disclose their internal governance and oversight of climate-related issues?

  9. What are the advantages and disadvantages of developing a single set of global standards applicable to companies worldwide?

  10. How should disclosures under any such standards be enforced or assessed? 

The SEC said members of the public are invited to submit their input via a webform or email address.

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