The Justice Department is wrapping up its prosecution of over a dozen Swiss banks and its evaluation of more than 78 Swiss banks that self-reported tax evasion through its 'Swiss Bank Program'. As part of the investigation, the DOJ received a treasure trove of previously secret customer account information provided by the participating banks. This information enables the DOJ to trace accounts that left the Swiss banks and transferred assets to financial institutions elsewhere in the world - including in Singapore and Hong Kong - to avoid the US tax authorities (known as “leavers”).  

Joining forces

Herbert Smith Freehills and Sharp Partners have joined forces to conduct a series of meetings and presentations to advise clients on the risks associated with “leavers” and the DOJ's likely approach when pursuing banks in Hong Kong and Singapore, especially in light of the information the DOJ has already collected, with a focus on which banks in the region have received high-risk funds.  

Identifying high risk ‘leavers’

Based upon the firms' experiences with the Swiss Bank Program, and with investigations in Asia, both Herbert Smith Freehills Partner Kyle Wombolt and William Sharp, founding partner of Sharp Partners, suggested ways to identify and remediate high risk “leaver” clients.  

‘Well-advised’ to understand exposure

Kyle Wombolt, global head of the firm's corporate crime and investigations practice, stated: ‘It is no secret that banks in Asia – especially Singapore and Hong Kong – are destinations for funds which US taxpayers do not want to disclose.  The DOJ knows it and intends to find those taxpayers and the financial institutions that assisted them.  So too, the local authorities know it and have expanded their anti-money laundering laws to ferret out suspicious funds. In light of the aggressive behaviour of the US and local authorities, US taxpayers and financial institutions are well-advised to take steps to understand their exposure to these laws and consider how best to proceed to protect their interest.’

‘US authorities intend to follow “leavers”’

William Sharp, founding partner of Sharp Partners, commented: ‘Through our extensive experience representing clients in the Swiss Bank Program and what we have learned from DOJ attorneys responsible for the program, there is little doubt that the US authorities intend to follow the “leavers” flow of Swiss-source funds to locations such as Singapore and Hong Kong. The DOJ already has the “leavers” information in hand to readily identify to which countries and banks have received “leaver” funds. From a US law enforcement perspective, the Swiss Bank Program has been a great success and it should be no surprise that the DOJ will adapt the principles of that model throughout the world.’