“In certain instances, Bank personnel ignored obvious red flags of wrongful intent on the part of the prospective or actual U.S. clients from which Bank personnel knew or should have known that the U.S. clients were using their Butterfield accounts to maintain undeclared assets or otherwise engage in tax evasion.”
(CMR) Butterfield Bank has agreed to forfeit USD $4.8 million and turn over client records as part of a non-prosecution agreement after it admitted to fraudulently helping United States taxpayers evade taxes through its Bermuda and Cayman Islands operations. The agreement was filed by the U.S. Department of Justice in federal court on Tuesday, August 3 and is a civil settlement in a tax evasion investigation.
They have also agreed to pay $704,000 in restitution to the IRS which represents the approximate unpaid taxes arising from the tax evasion claims by Butterfield's U.S. taxpaying clients.
The United States Attorney for the Southern District of New York and the Acting Deputy Assistant Attorney General for Criminal Matters for the United States Department of Justice Tax Division filed a verified complaint for forfeiture against the bank in the jurisdiction of the Southern District of New York. It claims that the defendant funds “constitute proceeds of mail and wire fraud” and are subject to forfeiture.
The documents alleged that Butterfield maintained undeclared accounts for certain U.S. taxpayer clients that were held by sham entities from January 2, 2001 through December 31, 2013. Those structures it shared had no legitimate business purpose. It further asserts that Butterfield maintained the accounts despite bank personnel knowing or should have known that they were being used by U.S. taxpayers to conceal the identities of the true beneficial owners of the accounts.
This, in turn, caused the taxpayers to “submit individual federal income tax returns to the IRS that were materially false and fraudulent” because it failed to disclose the existence of those accounts.
“As a result of the conduct, the Bank received approximately $4,896,000 in gross fees paid to the Bank by U.S. taxpayers with undeclared accounts.”
It shared that bank employees did not adhere to its own longstanding practice of ensuring clients had a connection to Bermuda or the Cayman Islands. Butterfield agreed that the funds are subject to civil forfeiture to the United States as proceeds of mail and wire fraud.
“Despite being aware of this legal duty, Butterfield opened and maintained undeclared accounts for U.S. taxpayer-clients although the Bank knew, or should have known, that doing so allowed U.S. taxpayers to evade their U.S. tax obligations. As a result of this conduct, the number of undeclared U.S. taxpayer accounts at Butterfield increased, thereby increasing the fees it earned.”