Dept of Justice targets Swiss Life over ‘tax evasion’ by US clients
Swiss Life could face possible fines in the US after it was approached by the Department of Justice (DOJ) over its cross border business with US clients, the Zurich-based insurance giant has announced.
The suggestion is that Swiss Life may have been complicit in assisting US clients to evade tax in neglect of its obligations under FATCA, and comes after US prosecutors widened their probe of Swiss banks to include insurance companies.
Switzerland -based news website Swiss Life said: “After going after Swiss banks with a vengeance for abetting tax evasion, it appears that it is now the turn of the Swiss insurance industry to attract unfavourable attention from the DOJ.”
Its portfolio with US clients of Swiss Life Liechtenstein and Swiss Life Singapore amounts around 250m Swiss francs, down from a high of 1bn Swiss francs in the past, Swiss Life said in a brief statement confirming the approach by DOJ.
The company simply added , “Swiss Life will use the opportunity for dialogue and explain its past cross-border business in cooperation with the US authorities.”
Illicit use of insurance wrappers
The central issue appears to be over the use of “insurance wrappers” – life insurance policies that are “wrapped” around a client’s investment portfolio across a number of investments and thus not tied to that client but to the policies, “into which the very wealthy can place stocks, private equity holdings and other bankable assets, exploiting tax benefits on investment income held in such policies”, said Reuters.
Swiss Life sold these products in the US from 2006 to 2012. It returned funds to hundreds of US clients who had invested in insurance wrappers linked to bank accounts at Bank Frey in 2013, The Wall Street Journal has reported.
Huge fine possible
US authorities have focused their attention on Swiss banks and financial institutions, with Reuters suggesting that banks that have been identified as having helped US citizens evade tax have been obliged to pay settlements of between 1% and 7% of the AUM in the US.
This would, in the case of Swiss Life, suggest a fine of US$70m if the insurance giant were to admit the charges.
Credit Suisse was fined US$2.5bn in 2014 after it admitted similar charges.
And in 2016, Swiss bank Union Bancaire Privée was fined US$187m over undeclared bank accounts for US clients that used insurance wrappers and other charges relating to tax evasion abetting offences uncovered by DOJ.