Another Swiss Bank Bites The Dust

21 May

This was released by the Office of Public Affairs of the Department of Justice and can be viewed online and is reproduced here.


Finter Bank Zurich AG Reaches Resolution under Department of Justice Swiss Bank Program

The Department of Justice announced today that Finter Bank Zurich AG (Finter), located in Zurich, Switzerland, reached a resolution under the department’s Swiss Bank Program.

The Swiss Bank Program, which was announced on Aug. 29, 2013, provides a path for Swiss banks to resolve potential criminal liabilities in the United States.  Swiss banks eligible to enter the program were required to advise the department by Dec. 31, 2013, that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S.-related accounts.  Banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Under the program, banks are required to:

  • Make a complete disclosure of their cross-border activities;
  • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
  • Cooperate in treaty requests for account information;
  • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
  • Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
  • Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

According to the terms of the non-prosecution agreement signed today, Finter agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a $5.414 million penalty in return for the department’s agreement not to prosecute Finter for tax-related criminal offenses.

Finter was founded in 1958 in Chiasso, Switzerland, and has a branch office in Lugano, Switzerland.  Since Aug. 1, 2008, Finter has maintained 283 U.S.-related accounts with an aggregate maximum balance of approximately $235 million.

Since its establishment and continuing through at least October 2011, Finter, through its managers, employees and others, aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the Internal Revenue Service (IRS).  After August 2008, when Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by U.S. tax authorities, Finter accepted accounts from U.S. persons exiting other Swiss banks.

Finter provided services that allowed U.S. clients to eliminate the paper trail associated with the undeclared assets and income, including “hold mail” services and numbered and coded accounts.  In addition, Finter assisted clients in using sham entities as nominee beneficial owners of undeclared accounts, solicited Forms W-8BEN that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts, and provided cash cards and credits cards linked to the undeclared accounts.

In resolving its criminal liabilities under the program, Finter encouraged U.S. accountholders to come into tax compliance and participate in the IRS Offshore Voluntary Disclosure Program.  While Finter’s U.S. accountholders who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program to resolve undeclared offshore accounts will pay a penalty equal to 27.5 percent of the high value of the accounts.  On Aug. 4, 2014, the IRS increased the penalty to 50 percent if, at the time the taxpayer initiated their disclosure, either a foreign financial institution at which the taxpayer had an account or a facilitator who helped the taxpayer establish or maintain an offshore arrangement had been publicly identified as being under investigation, the recipient of a John Doe summons or cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.  With today’s announcement of Finter’s non-prosecution agreement, its noncompliant U.S. accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the IRS Offshore Voluntary Disclosure Program.

Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division thanked the IRS and in particular, IRS-Criminal Investigation and IRS’s Large Business and International Division for their substantial assistance, as well as Senior Litigation Counsel John E.  Sullivan and Trial Attorney Mark Kotila of the Tax Division, who served as counsel on this matter, and Senior Counsel for International Tax Matters and Coordinator of the Swiss Bank Program Thomas J. Sawyer of the Tax Division.

Additional information about the Tax Division and its enforcement efforts may be found on the division’s website.

15-622
Updated May 15, 2015

Paperwork and Punishment: It’s Time to Fix FBAR

6 Jan

Long Arm of IRS to Expats

Paperwork and Punishment: It’s Time to Fix FBAR” is an academic paper published in Tax Notes International in October 2014 by Allison Christians, Associate Professor who holds the H. Heward Strikeman Chair in Tax Law at McGill University Faculty of Law. In it she vividly details the fallacy of FBAR as a tool to catch criminals, tax evaders, money launderers and terrorists. To wit, the responsibility for collecting the Foreign Bank Account Report has been handed over to FinCEN, Financial Crimes Enforcement Network, described by the Treasury Department as the Financial Intelligence Unit of the United States. Thus there is a criminal stigma associated with entering oneself in a crime enforcement registry. In her introduction, she states, “Unfortunately, its increasingly draconian requirements and consequences now apply to millions of innocent bystanders who are collateral damage in the ongoing battle against financial crime. Their inclusion in the FBAR regime is a massive waste of both government and taxpayer resources, effectively criminalizing activities that are wholly unconnected to financial crime, and perversely discouraging compliance. All of this is unnecessary because as the administrator of FBAR, Treasury can immediately fix the problems. The difficulty is that FBAR is still relatively obscure to those not caught in its grasp, and the extent of the damage it is doing to U.S. taxpayers and to the integrity of the tax system is thus under-appreciated. This damage is real, but it can be reversed by re-focusing FBAR where Congress intended: on likely criminal activity. In short, this Essay demonstrates that the FBAR regime is broken and it is time for Treasury to fix it.

Did you know that the FBAR came about as part of the Bank Secrecy Act of 1970? The $10,000 threshold for requiring that all foreign financial institution accounts be reported has not changed since it was first chosen as the criterion for reporting. With no inflation adjustment, its impact has significantly broadened over the years, and it now inflicts huge penalties on millions of individuals who should never have been in its sights. Had it been inflation adjusted, it would require you to list all your foreign accounts if their total reached approximately $50,000.

U.S. persons  living  permanently  in  other  countries  may  disagree  with  the  U.S. policy of taxing citizens on a global basis. A harsh regime that involves extensive and duplicative financial reporting with a criminal stigma attached is a recipe for deepening resentment. If the United States takes the sensible route in adopting residence based taxation, the extreme cost of FBAR filing, measured in dollars and time spent as well as an increasingly fragile taxpayer morale, will disappear along with millions of unnecessary annual returns showing no tax owed. This will free up scarce administrative resources, allowing the IRS to turn its focus where it belongs; on those who are determined to cheat and evade the system to the detriment of everyone. Until then, it is in the  interest of al  taxpayers, the IRS, and the  income  tax  as a whole that FBAR compliance be a  normal rather than criminal experience, and that it be no more difficult or draconian than is absolutely necessary.

Does FATCA Apply To Me?

30 Dec

Originally posted on IRS vs expats:

This letter and response to it was published in the latest ACA (American Citizens Abroad) newsletter. It provides and insight into how FATCA, a law that only affects FFIs (foreign financial institutions), can have a direct personal effect on each and every individual EXPAT.

ACA - The Voice of Americans Overseas

Dear ACA, I have been trying to keep myself updated on FATCA and how it can affect me, but until recently I thought that I only had to worry about tax compliance, that is, making sure my taxes were totally correct because my financial institutions would be reporting everything to the IRS anyway. I thought the problem of being denied financial services was a problem with other countries like Switzerland, and living in Scandinavia, that would not be a problem for me.

In the last months, however, I wanted to start saving in an Index fund for my infant son, and so I…

View original 931 more words

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