Schroders latest to brace for US tax evasion fines
London: Schroders is the latest UK group to set aside millions of pounds for potential fines arising from a US investigation into companies that helped American clients evade taxes.
Schroders, the UK’s second-biggest listed fund house, has reserved £15 million (Dh92 million) for a possible penalty in connection with the investigation being carried out by the US Department of Justice.
The fund company, which disclosed the legal provision in its 2013 results last week, said the fine related to its Swiss private bank.
Schroders is participating voluntarily in a DoJ programme that began last August. It aims to encourage financial institutions to identify client accounts that may not have been tax compliant in order to reach a non-prosecution agreement.
Fines arising from non-prosecution agreements vary depending on how many undeclared US clients the company had and when these clients were taken on. The fines are levied on all undeclared accounts that contained more than $50,000, with heavier fines for accounts that were opened after 2008.
Coutts, RBS’s private banking business, also said at the end of February that it is participating in the DoJ programme “based on the possibility that some clients may not have declared their assets in compliance with US tax laws”.
RBS did not disclose any legal provisions relating to the investigation. A wealth management consultant, who wanted to remain anonymous, said any financial group with a Swiss banking licence that is participating in the programme will “inevitably” face fines as a result of the US inquiry.
HSBC Private Bank has similarly set aside $352 million for legal costs relating to “various legacy regulatory investigations”, according to its annual results, which were published two weeks ago.
HSBC is one of 14 banks under criminal investigation by US authorities for their alleged role in helping US clients avoid taxes. A spokesperson declined to comment on how much of the $352m legal provision related to this investigation.
He added: “2013 in particular was a year where we were repositioning the business in a major way and tidying it up. We don’t want to be facilitating anyone evading their taxes.”
Christopher Wheeler, an analyst at Mediobanca, the Italian group, said the investigation is a “big issue” for European banks that are now trying to rid themselves of offshore clients in Switzerland.
He said: “This is a big clean-up operation which is hurting them because [offshore banking] was a very profitable business. You can have 200 clients as an offshore banker, but no more than 11 as an onshore banker.”
The analyst added that the potential for multimillion-dollar fines from US authorities has made European banks “very nervous about making any acquisitions as they don’t dare touch the legacy [clients]”.
“We live and die by litigation and will continue to do so,” he said.