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Second Swiss bank reaches deal under U.S. tax program

NEW YORK (Reuters) – Vadian Bank AG has become the second of what are expected to be dozens of Switzerland-based private banks to reach a deal with the U.S. Department of Justice under a voluntary disclosure program for assisting Americans in evading taxes.

The program, launched in 2013, allows Swiss banks to avoid prosecution by disclosing cross-border activities that helped U.S. account holders conceal assets and income. Banks already under criminal investigation are excluded from the program.

BSI became the first Swiss bank to settle under the program in March.

Vadian, a small bank which has one office in St. Gallen, in northeast Switzerland, accepted accounts that were forced out of other Swiss banks in 2008 after it became public that UBS AG was the target of a criminal investigation over facilitating tax evasion, the Justice Department said in a statement.

Vadian, which was undeterred because it had no U.S. presence, increased its U.S.-related accounts from two to more than 70, with $76 million in assets under management after August 2008, the Justice Department said.

Under a non-prosecution agreement, Vadian will pay a $4.25 million penalty, demonstrate that it put in controls to stop misconduct in undeclared U.S. accounts and cooperate in related legal proceedings.

A U.S. lawyer for Vadian did not immediately return a call for comment.

Zurich-based UBS paid $780 million and admitted wrongdoing in a 2009 deal for helping thousands of Americans evade taxes, and Credit Suisse last May pleaded guilty to a U.S. criminal charge and agreed to pay more than $2.5 billion in penalties.

Criminal investigations also have been opened against other banks, including Julius Baer and HSBC’s Swiss private bank.

The Justice Department is working toward resolutions with the banks in the voluntary program, and at the same time has opened investigations of individuals and entities based on information from banks in the program, Caroline Ciraolo, acting assistant attorney general, said in a statement Friday.

Under the program, banks must provide detailed information on accounts in which U.S. taxpayers have an interest and agree to close accounts that do not meet U.S. obligations.

Swiss banks, which have come under intense pressure to give up their traditional secrecy, also must cooperate in treaty requests for account information.

Vadian, founded in 1811, was historically known as Ersparnisanstalt der Stadt St. Gallen, which loosely translates into St. Gallen Community Savings Bank, according to the non-prosecution agreement. It was acquired by St. Galler Kantonalbank in August.

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