On July 24, 2013, Liechtensteinische Landesbank AG ("LLB") and the Department of Justice (the "DOJ") entered into a non-prosecution agreement ("NPA") with respect to LLB's US tax issues.1 The NPA provides that LLB will pay $23.8 million to US authorities, and LLB must cooperate with the DOJ over the next three years. The NPA is expected to pressure Swiss banks that are under investigation to settle with the DOJ because, as a result of the NPA, LLB will likely provide information about the Swiss banks to the DOJ.

LLB is the first bank to enter into an NPA with the DOJ after admitting to conduct that involved the facilitation of tax evasion by US taxpayers. When entering into the NPA, the DOJ took into consideration LLB's cooperation with the DOJ and the IRS. The fact that LLB is majority owned by the Principality of Liechtenstein may also have influenced the DOJ's decision to entered into an NPA with LLB rather than a deferred prosecution agreement.

Of the $23.8 million settlement, $16.3 million represents forfeited proceeds from the maintenance of undeclared US accounts and $7.5 million represents restitution. LLB previously announced on July 18, 2013 that it set aside a CHF 31 million ($33 million) reserve in anticipation of resolving its US tax issues.2 LLB had earlier set aside CHF 16 million on December 31, 2012.

The DOJ has recently targeted foreign banks and fiduciaries (such as lawyers, accountants and investment advisers) who are suspected of assisting customers in hiding assets abroad to evade US taxes. The DOJ requested that the Liechtenstein Tax Administration provide administrative assistance in May 2012 and asked for information that would aid the DOJ's investigation of LLB's US customers that were suspected of holding undisclosed assets at the bank. The request was made shortly after Liechtenstein amended its Law on Administrative Assistance in Tax Matters to allow information exchange requests when a taxpayer's identity is unknown. The DOJ also made an informal document request to Liechtenstein in March asking for statistical information on fiduciaries that assisted US taxpayers in forming foundations or establishments in an effort to evade US taxation.3

Footnotes

1 See Kristen A. Parillo and Stephanie Soong Johnston, "Liechtenstein Bank Settles US Tax Dispute for $24 Million," Tax Notes Today, July 31, 2013.

2 See Stephanie Soong Johnston, "Liechtenstein Bank Reserves Extra $33 Million to Resolve US Tax Dispute," Tax Notes Today, July 19, 2013.

3 See Jaime Arora, "Seeking Tax Evaders, US Requests Liechtenstein Data," Tax Notes Today, March 26, 2013.

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