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Cayman firms helped US clients hide millions

Cayman scandal: two firms in the Caribbean territory have admitted hiding millions of dollars of US citizens' money from tax authorities

NEW YORK (Bloomberg) — Two units of Cayman National Corp pleaded guilty to helping US clients evade taxes and hide more than $130 million in offshore accounts as a Justice Department crackdown on tax cheats expands beyond Switzerland.

Cayman National Securities and Cayman National Trust pleaded guilty in New York federal court with Stuart Dack, Cayman National’s chief executive, saying the bank advised and helped Americans evade taxes for more than a decade beginning in 2001 by helping US citizens hide their money.

“Cayman National Trust and Cayman National Securities engaged in this conduct knowingly and willingly, and did so knowing it was wrong,” Dack said.

The two units agreed to cooperate with a government probe and provide investigators with client files to identify Americans who dodged taxes. As part of a plea agreement with the US government, District Judge Thomas Griesa sentenced both units to pay fines, forfeitures and other penalties totaling $6 million. The conviction was the first for a non-Swiss financial institution, the US said.

“We are committed to finding and prosecuting not only banks that help US taxpayers evade taxes but also individual taxpayers who find criminal ways not to pay their fair share,” Manhattan US Attorney Preet Bharara said.

Switzerland’s three largest banks have resolved criminal tax cases with the US, paying a combined $3.9 billion and admitting how they helped Americans dodge taxes. Another 80 Swiss banks avoided prosecution in the past year by paying penalties of $1.37 billion and voluntarily disclosing their wrongdoing as part of a Justice Department programme.

Cayman National, the parent, has offered full-service banking and investment opportunities since 1984, according to the Grand Cayman-based bank’s website.

The two Cayman National units encouraged US clients to open accounts in the names of sham Cayman companies and trusts, Bharara said. In 2009, the two units managed about $137 million of US client assets in undeclared accounts, according to court papers. Combined, they earned more than $3.4 million in gross revenues from these accounts, the US said.

After learning of the investigation of UBS Group AG around 2008, the two Cayman National units continued to maintain undeclared accounts of US taxpayers. The units didn’t start to try and follow the law until 2011 and 2012, prosecutors said.

On February 5, Julius Baer Group Ltd agreed to pay $547 million to avoid US prosecution and admitted it helped American clients hide billions of dollars in assets from tax authorities while coaching its bankers on how to avoid detection.

Julius Baer followed larger Swiss rivals UBS and Credit Suisse Group AG in resolving US tax probes. UBS did so by agreeing in 2009 to pay $780 million, while Credit Suisse reached a $2.6 billion deal in 2014.