Swiss Life Gets Busted for Conspiring with US Tax Evaders to Hide Assets and Income
Posted on 05/24/2021
On May 14, 2021, the U.S. Department of Justice (DOJ) filed a criminal information charging Swiss Life Holding AG (Swiss Life Holding), Swiss Life (Liechtenstein) AG (Swiss Life Liechtenstein), Swiss Life (Singapore) Pte. Ltd. (Swiss Life Singapore), and Swiss Life (Luxembourg) S.A. (Swiss Life Luxembourg), collectively, the “Swiss Life Entities,” with conspiring with U.S. taxpayers and others to conceal from the Internal Revenue Service (IRS) more than US$ 1.452 billion in offshore insurance policies, including more than 1,600 insurance wrapper policies, and related policy investment accounts in banks around the world and the income generated in these accounts.
Swiss Life Holding AG is the ultimate parent company of the Swiss Life group of companies (Swiss Life), a Switzerland-based provider of comprehensive life insurance and pension products for individuals and corporations, as well as asset management and financial planning services. Swiss Life created and marketed specially designed insurance products to U.S. tax evaders seeking a new way to hide their offshore assets. The Swiss Life Entities offered private placement life insurance policies and related investment accounts to U.S. customers, and provided services that concealed the policies and other assets from the IRS. Swiss Life pitched its services as an alternative to Swiss banks, which were historically known for bank secrecy.
According to the press release, “The Justice Department also announced a deferred prosecution agreement with the Swiss Life Entities (“the Agreement”) under which they agreed to accept responsibility for their criminal conduct by stipulating to the accuracy of the Statement of Facts attached to the Agreement. The Agreement requires the Swiss Life Entities to refrain from all future criminal conduct, enhance remedial measures, and continue to cooperate fully with further investigations into hidden insurance policies and related policy investment accounts. Further, as part of today’s resolution, the Swiss Life Entities agreed to pay approximately $77.3 million to the U.S. Treasury, which includes restitution, forfeiture of all gross fees, and a penalty component. If the Swiss Life Entities abide by all of the terms of the Agreement, the government will defer prosecution on the information for three years and then seek to dismiss the charge.”
Monetary Penalties
Swiss Life Holding plans to pay a total of US$ 77,374,337, which is divided into three parts. The first part has Swiss Life Holding paying US$ 16,345,454 in restitution to the IRS, which represents the approximate unpaid taxes resulting from the Swiss Life Entities’ participation in the conspiracy. Second, Swiss Life Holding has agreed to forfeit US$ 35,782,375 to the United States, which represents the approximate gross fees (not profits) that the Swiss Life Entities earned on the penalized insurance policies and related policy investment accounts between 2005 and 2014. Finally, Swiss Life Holding has agreed to pay a penalty of US$ 25,246,508.
The press release adds, “From 2005 to 2014, Swiss Life through affiliated insurance carriers in Liechtenstein (Swiss Life Liechtenstein), Luxembourg (Swiss Life Luxembourg), and Singapore (Swiss Life Singapore), (collectively, the PPLI Carriers) maintained approximately 1,608 Private Placement Life Insurance (PPLI) policies. The PPLI Carriers’ issuance and administration of those policies (colloquially known as “insurance wrappers”) and the related investment accounts were often done in a manner to assist U.S. taxpayers in evading U.S. taxes and reporting requirements and concealing the ownership of offshore assets.
Moreover, beginning as early as the summer of 2008, the PPLI Carriers were aware that UBS and other Swiss banks were terminating or reevaluating their business relationships with U.S. clients in response to increasing offshore tax enforcement efforts by U.S. authorities. Certain management and sales personnel within the Swiss Life PPLI Business Unit viewed these developments as a business opportunity to expand the PPLI Business by onboarding U.S. clients who were fleeing UBS and other Swiss banks. Such clients with undeclared assets were typically referred within Swiss Life as “non-comprehensive advice seeking,” which was frequently abbreviated to “NCAS.” Because Swiss Life would be identified as the owner of the policy investment accounts, rather than the U.S. policyholder and/or ultimate beneficial owner of the assets, the insurance wrapper policies could be and were used by unscrupulous U.S. taxpayers to hide undeclared assets and income and to evade taxes. In turn, Swiss Life grew its PPLI business and earned fees on those policies. Members of management of the PPLI Business Unit knew about and authorized the onboarding of U.S. clients without regard to whether they were declared or undeclared.”
First it was Swiss banks like UBS Group AG and Credit Suisse, which were involved in U.S. taxpayer evasion activities. The crack down on Swiss banks prompted tax evaders to buy wrappers from insurance companies. The IRS has been targeting Swiss insurance companies. Under the resolution from May 14th, the Swiss Life entities are mandated to cooperate fully with ongoing investigations and affirmatively disclose any information they may later uncover regarding U.S.-related insurance policies and related policy investment accounts. These insurance wrappers are essentially life insurance policies and some tax evaders bought the policies to keep their undeclared assets hidden from the IRS.
The press release adds that “The Swiss Life Entities are also required to disclose information consistent with the Department of Justice’s Swiss Bank Program relating to accounts closed between Jan. 1, 2008, and Dec. 31, 2019. The Agreement provides no protection from criminal or civil prosecution for any individuals.”
