The decision follows discussions between Julius Baer and the US Department of Justice (DOJ) regarding the final settlement of the investigation into the bank’s legacy US cross-border business.
Alongside several other Swiss banks that remain under Justice Department investigation, Julius Baer is accused of aiding US tax evasion by providing undeclared accounts through Switzerland’s bank secrecy laws.
The bank said the $350m provision will be charged to the company’s 2015 half-year results, which will be released next month.
Earlier this month, Swiss banks Société Générale Private Banking (Suisse) and Berner Kantonalbank AG, also entered deferred tax evasion prosecution agreements with the US.
"US account holders’ options will continue to narrow and more will be caught by the 50% penalty"
Julius Baer said the amount it has set aside reflects its “existing understanding and the present state of the preliminary discussions” with the DOJ and may be subject to change.
“Whilst there is no defined timetable for a final settlement, Julius Baer continues to work towards closing this regrettable legacy issue as soon as possible,” the bank added.
Time is running out
Paul Behling, of counsel at legal firm Withers’ Zurich office, said the company’s calculation of $350m shows that they think they are close to agreeing a settlement.
“This is significant, as Julius Baer is one of the better known and larger banks and it may signal many more to come, perhaps faster than expected, over the next few months,” he said.
He said the key point for US persons that have not yet disclosed Swiss accounts is the increased penalty rate to enter into the US Internal Revenue Service’s Offshore Voluntary Disclosure Program, should a settlement occur.
Under the program, a 50% offshore penalty applies if a foreign financial institution at which the taxpayer has or had an account has been publicly identified as being under investigation or as cooperating with a government investigation.
Behling said that once Julius Baer reaches a deal with the US authorities, account holders will be unable to make a voluntary disclosure with its reduced 27.5% fine. Instead, they will have to pay the full 50% penalty, which will apply to each account they own.
“As more Swiss banks join the cooperation list, US account holders’ options will continue to narrow and more will be caught by the 50% penalty,” he added.
Last year, Credit Suisse pleaded guilty to aiding US tax evasion, for which it paid $2.6bn.
