Swiss private banking firm Julius Baer Group Ltd. JBAXY is planning to settle a four-year tax evasion investigation initiated by the U.S. authorities for around $547 million. The company reached an “agreement in principle” with the U.S. Attorney’s Office for the Southern District of New York to resolve the probe.
The company made an additional provision of $197.25 million, beyond the $350 million reserved in last June for the same purpose. While the settlement is subject to a final approval from the U.S. Department of Justice (“DOJ”), the company anticipates an ultimate resolution with the DOJ in the first quarter of 2016.
The provision will be charged to Julius Baer’s 2015 results. However, the company expects to report net profit for the year even after adjustments, and also remains adequately capitalized with a BIS total capital ratio of 18.6% as of Oct 31, 2015.
Julius Baer came under the regulatory radar for allegedly aiding wealthy American clients to avoid tax. Switzerland’s third-largest wealth manager reportedly provided undeclared accounts to clients, which got secrecy protection as per Swiss law.
Other major Swiss banks like UBS Group AG UBS and Credit Suisse Group AG CS have also been under the regulatory scanner for similar issues. UBS had settled a tax evasion probe by paying $780 million to the regulators in 2009.
Moreover, in May 2014, Credit Suisse had pleaded guilty to criminal charges for assisting its U.S. clients in dodging tax; and agreed to pay $2.6 billion to the U.S. authorities for settling the case. This fueled analysts’ predictions of a larger fine of as much as $900 million for Julius Baer earlier in 2015.
Also, the Swiss unit of HSBC Holdings plc HSBC is still undergoing regulatory probe for similar charges.
Julius Baer’s attempts to settle the long-running case with the DOJ and its assurance of making profit in 2015 despite the settlement provision will surely delight investors.
The current announcement comes after the DOJ reached resolutions under the department’s Swiss Bank Program.
“With today’s resolutions under the Swiss Bank Program, the department has reached agreements with 75 Swiss banks, imposed penalties in excess of $1 billion, and secured voluminous and detailed information regarding the illegal conduct of financial institutions, professionals and accountholders around the world,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division. “Building on the success of the Swiss Bank Program, the civil and criminal offshore enforcement efforts of the department and its partners in the IRS will be a top priority in 2016.”
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