Butterfield Bank Admits It Helped Americans Evade U.S. Taxes

(Bloomberg) -- The Bank of N.T. Butterfield & Son, based in Bermuda, has agreed to pay $5.6 million to resolve a criminal probe by U.S. authorities after admitting it helped hundreds of American clients evade taxes for more than a decade.

Between 2001 and 2013, Butterfield helped clients hide assets from the Internal Revenue Service, letting them use sham entities to funnel money between U.S. and Cayman Islands accounts, Manhattan U.S. Attorney Audrey Strauss said in a statement on Tuesday.

“Butterfield knew or should have known that such U.S. taxpayer clients were using their Butterfield accounts to evade their U.S. tax obligations,” according to the non-prosecution agreement signed by the Hamilton, Bermuda-base bank. Butterfield can avoid criminal prosecution by cooperating with investigators for three years and not violating other terms of the agreement.

The bank had as many as 300 U.S. accounts hidden from the IRS at any time, and it helped hide $61 million in assets, according to the statement. Prosecutors cited the “extraordinary cooperation” by Butterfield, which will forfeit $4.9 million and pay $704,000 in restitution. It also gave unredacted files on 386 non-compliant clients to government investigators.

2013 Investigation

Butterfield Chief Executive Officer Mark Collins said the agreement resolves an investigation that the bank reported in 2013.

“Since that time, we have enhanced our compliance controls for business with U.S. clients and the total payment has been provisioned,” Collins said in a statement. “Moving forward we remain focused on delivering for our clients and our stakeholders.”

The U.S. has cracked down on offshore tax evasion for more than a decade, which has swept up banks and taxpayers alike. In 2009, UBS AG paid $780 million to the U.S., admitting it helped thousands of Americans evade taxes. The biggest settlement was with Credit Suisse Group AG’s agreement to pay $2.6 billion in 2014.

In 2016, the U.S. reached the last of 80 non-prosecution agreements with banks that said they committed tax-related criminal offenses. Those banks, which included BSI SA, Union Bancaire Privee and Bank Lombard Odier & Co., held about $50 billion in U.S. assets in 35,096 accounts from 2008 to 2013, according to data compiled by Bloomberg.

Last year, Bank Hapoalim agreed to pay $874 million to settle U.S. charges that it conspired with American taxpayers to hide more than $7.6 billion in secret Swiss and Israeli accounts.

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