ORX News digest of the month – April 2019

  • 10 May 2019

Every month the ORX News team publishes a featured digest from the ORX News Service. It's a detailed look at one of the losses reported in the media that month, and is handpicked by the team as one of the most interesting stories.

Zurich fined USD 5.1 million by DoJ over sale of products used for tax evasion

Two Zurich subsidiaries, based in Switzerland and the Isle of Man respectively, have agreed to pay $5.1 million to the United States over insurance policies and accounts used by US customers to evade tax.

US taxpayers used the policies and accounts issued by Zurich to conceal undeclared assets from the Internal Revenue Service (IRS) and subsequently evade taxes and reporting requirements. Some of these products were unit-linked insurance policies which allowed customers to access potentially higher returns by taking on market risk. The base death benefit for some of these policies was nearly equivalent to the cost of the policy and, in some cases, was fully funded by transfers from offshore bank accounts.

Zurich issued approximately 420 of the policies between January 2008 and June 2014, which had an aggregate value of $102 million. According to the DoJ, Zurich failed to ensure timely compliance by policyholders with US tax laws and knew, or should have known, that it was helping taxpayers to conceal assets

Zurich self-disclosed to the DoJ in July 2015 following a global review of its US offshore life insurance, savings and pension business. This review followed the introduction of the DoJ’s Swiss Bank Program in 2013.

In addition to the $5.1 million penalty, Zurich is required to implement controls to stop misconduct which involves undeclared US accounts in return for non-prosecution for tax-related criminal offenses.

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