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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.

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Updated May 15, 2015
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Non Expat Beanie Babies Creator Admits Tax Evasion

25 Sep

Will pay $53 mn penalty for FBAR failure

By David Voreacos and Andrew Harris (Bloomberg) as published online in Accountingtoday.com and is here ammended by IRS vs EXPATS
We must preface this post with the statement that this tax evader is NOT an expat. He is an American Person who lives in the United States of America and hid his millions in an offshore bank in Switzerland. I am an EXPAT who lives in Israel. My bank may be considered “offshore” by the IRS, but for me it is “ONSHORE.” My bank is around the corner from where I live and is used by me to deposit my local income and to pay people day to day with the bank credit card and checks. The Justice Department, in its public announcements such as this one, should accentuate that the guilty parties are not expats.

(Bloomberg) H. Ty Warner, the creator of Beanie Babies plush toys, was charged with tax evasion for failing to report $3.2 million in income on a secret Swiss bank account that held as much as $93.6 million in assets, and will pay over $50 million in penalties for failing to file an FBAR.

Warner, 69, will plead guilty in federal court in Chicago for hiding income at UBS AG, the largest Swiss bankd, U.S. Attorney Gary Shapiro said in a statement. Warner falsely reported his 2002 income as $49.1 million, omitting money he made on his UBS account. He amended his 2002 return in 2007, yet understated his tax by $885,300, according to court papers.

Since 2009, the U.S. has prosecuted about 70 U.S. taxpayers and 30 bankers, lawyers and advisers in a crackdown on offshore tax evasion.  Warner, the sole owner of TY Inc., held the highest account balance of the taxpayers prosecuted in the crackdown.

 “This is an unfortunate situation that Mr. Warner has been trying to resolve for several years now,” Gregory Scandaglia, Warner’s attorney, said in a statement. “Mr. Warner accepts full responsibility for his actions with this plea agreement.”

Warner, of Oak Brook, Illinois, also will pay a civil penalty of $53.6 million for failing to file a required Report of Foreign Bank and Financial Accounts, or FBAR, according to Scandaglia. He is scheduled to appear in court for his plea on Octocber 2, according to Shapiro’s spokesman Randall Samborn.

Warner opened a secret account at UBS in 1996. From there, he transferred $93.6 million in December 2002 to another secret Swiss account at Zurcher Kantonalbank, according to his criminal charging document known as an information.He disguised his ownership of the ZKB account by holding it under an entity called the Molani Foundation, court papers show. In 2002, he failed to report his UBS income of $3.2 million to his outside accountants, and didn’t file an FBAR. The tax return he filed for 2002 also was false, according to the information.

In 2009, Warner tried to avoid prosecution through an amnesty program at the Internal Revenue Service known as the Offshore Voluntary Disclosure Program, according to Scandaglia. He was denied entry, the lawyer said.

As an added note, the Beanie Babie Billionaire is to be sentenced on January 14, 2014. Apparently he has requested a judge to give him probation, not prison, for evading taxes. You can read about it in Accounting Today for the Web.

And The Walls Came Tumbling Down – Switzerland Helping IRS Find Tax Evaders

30 Aug

swiss flagNo more small potatoes million dollars here and million dollars there indictments. The big times will roll. The biggest net is now being thrown and the biggest fish are about to be caught. This is a big step in tightening the noose around the tax evaders. And I do not hesitate to predict, based on who these criminals have been in the past, that they WILL NOT BE EXPATS LIVING AND WORKING ABROAD. They will be prominent, seemingly law abiding citizens living in the United States, who secretly stash their illegally untaxed dollars in accounts outside the United States

Switzerland and the United States reached a watershed deal on August 29, 2013 to punish Swiss banks that helped wealthy Americans stash money in hidden offshore accounts, closing the door on an era of bank secrecy and tax evasion.

The formal agreement, which was announced on Thursday by the Justice Department in Washington and will be presented by Swiss authorities on Friday, outlined formulas for Swiss banks to pay up to billions of dollars in fines and disclose information about American account holders, a joint statement said.

The deal calls for stiff measures that lift the veil of Swiss secrecy. Banks will be required to provide the details on accounts in which American taxpayers have an interest through treaty channels, inform on other banks that transferred money into secret accounts or that accepted money when secret accounts were closed, disclose all cross-border activities, and close the accounts of Americans who are evading taxes.

Significantly, the deal does not cover 14 Swiss banks and Swiss branches of international banks that are under criminal investigation by the United States authorities, including Credit Suisse, Julius Baer and several regional banks. Instead, it effectively covers the rest of the Swiss banking industry, home to a tradition of bank confidentiality and laws that have not considered tax evasion a crime. By some estimates, Switzerland is home to more than $2 trillion in overseas deposits.

“This program will significantly enhance the Justice Department’s ongoing efforts to aggressively pursue those who attempt to evade the law by hiding their assets outside of the United States,” Eric H. Holder Jr., the attorney general, said in a statement.

He added that the program, outlined over 11 pages, “is intended to enable every Swiss bank that is not already under criminal investigation to find a path to resolution.”

The agreement said that Swiss banks that follow the program will be eligible to enter non-prosecution agreements that do not involve guilty pleas or criminal penalties.

Mr. Holder’s statement suggested that some unidentified Swiss banks were not cooperating and thus could face indictment. The agreement, he said, “creates significant risks for individuals and banks that continue to fail to cooperate, including for those Swiss banks that facilitated U.S. tax evasion but fail to cooperate now, for all U.S. taxpayers who think that they can continue to hide income and assets in offshore banks, and for those advisers and others who facilitated these crimes.”

The agreement will also turn up the heat on American clients who have not already entered voluntary disclosure programs with the Internal Revenue Service.

Banks that enabled tax evasion after the United States authorities began their investigation will face more severe punishment. Banks that held accounts as of Aug. 1, 2008, will pay a fine equal to 20 percent of the top dollar value of all non-disclosed accounts. The fine increases to 30 percent for secret accounts opened after that date but before March 2009, and to 50 percent for accounts opened after that.

American officials were angered that some Swiss banks accepted clients who were fleeing UBS, the largest Swiss bank, about 2009, when it averted indictment by reaching a $780 million deferred prosecution agreement with United States officials.

The Justice Department has not put a final tally on the amount that Swiss banks will pay in fines under the deal, an American government official said, in part because it does not yet know the number. Both sides signed the final deal after the Swiss Federal Council on Wednesday instructed the country’s finance officials to put the finishing touches on the agreement.

Switzerland has been locked in thorny negotiations with Washington over the tax evasion issue since 2009. Scores of Swiss bankers, lawyers and American taxpayers have been indicted in recent years, including Wegelin & Company, the oldest Swiss bank, which went out of business. Negotiations took a turn for the worse in recent years amid conflicts between Justice Department officials and Michael Ambuehl, the former top Swiss negotiator who stepped down in May.

A previous attempt by the Swiss government to arrange a deal failed in June when Parliament balked, reflecting concerns about privacy and complaints that the agreement was being negotiated in secret. Legislators then called on Eveline Widmer-Schlumpf, the Swiss finance minister and president of the Federal Council, to work out an agreement with Washington.

A stumbling block may still exist. The deal calls for both sides to use information exchange channels outlined in existing treaties. But the United States has not yet ratified a 2009 treaty protocol that would ease that disclosure, with Senator Rand Paul, Republican of Kentucky, blocking approval, arguing that it would give the I.R.S. too much power and violate Americans’ right to privacy.

American Citizens Abroad (ACA) Writes to IRS Commissioner on Unfair IRS Treatment of Americans Abroad

5 Apr
This is reprinted from the newsletter of the American Citizens Abroad  (ACA), which is the voice of Americans overseas, a non-profit, non-partisan, all-volunteer organization that represents the interests of Americans living and working outside the U.S. We urge you to join and support them.
On March 5th, American Citizens Abroad (ACA) wrote to Commissioner Doug Shulman of the IRS to express great concern that he has not yet answered the Tax Advocacy Directive (TAD) which National Taxpayer Advocate Nina Olson issued in August 2011 and repeated in her Report to Congress issued December 31st, 2011. In the TAD and in the Report to Congress, Nina Olson argued that IRS examiners treated some participants in the 2009 offshore voluntary disclosure program (OVDP) unfairly, and she ordered several IRS divisions to take various steps to correct this treatment, including allowing taxpayers who had paid penalties under the OVDP to request a reduced penalty. Many participants in the OVDP program have been Americans living overseas who had no idea they had to make a tax declaration to the United States, which is the only country in the world (besides renegade Eritrea), which taxes on the basis of citizenship instead of residence.

MaryLouise Serrato, Executive Director of ACA and co-signatory of the letter to Shulman, explained, “By imposing large penalties for a simple filing omission, the IRS has adopted a camouflaged policy of taxing assets of Americans abroad through penalties.” Anne Hornung-Soukup, Finance Director of ACA and the other co-signatory of the letter, said, “Our letter to Commissioner Shulman of the IRS makes it clear that ACA is in full agreement with efforts to find and hold accountable tax evaders.” Hornung-Soukup continued: “Many of the U.S. citizens living abroad who entered the OVDP in fact owed no taxes to the United States, since they had paid full taxes in their country of residence. Yet because of not filing their FBAR [Foreign Bank Account Report] forms, they faced IRS imposed fines and penalties amounting in some cases to their entire lifetime savings.”

ACA’s letter explained to Shulman that, on the FBAR form, Americans have to declare even accounts over which they have signature, but which they do not own, as well as joint accounts with non-citizens. This is particularly damaging to the many American women who are married to non-Americans and living abroad. They have often never worked outside of the home, and therefore do not owe any taxes. Yet to come into the system by filing the necessary FBARs, they will have to declare their foreign spouses’ accounts to the IRS and be subjected to heavy penalties, something their non-U.S. spouses are understandably reluctant to undergo.

ACA concluded its letter by stating its position that these huge problems for Americans living overseas are essentially due to the U.S. system of citizenship-based taxation. ACA is therefore strongly encouraging Congress to abandon citizenship-based taxation and to adopt residence-based taxation for individuals at the same time they adopt residence-based taxation for corporations. The full text of the letter can be read at:www.aca.ch/shulman-tad.pdf

Nice Catch for the IRS — $4,400,000,000.00

10 Feb

Yes, you are reading that big dollar number up there correctly. It really does say $4.4 billion.  And that is what the IRS reports that they reeled in for all their Offshore Voluntary Disclosure Initiatives, thus far. And there’s more to come. On January 9, 2012 they released news of their renewed OVDI in the release pasted below. This is good news, if you ask me, as perhaps they will concentrate more of their efforts on catching the real thieves, most of whom live in the USA, and less efforts on harassing we innocent law abiding citizens living abroad.

IRS Offshore Programs Produce $4.4 Billion To Date for Nation’s Taxpayers; Offshore Voluntary Disclosure Program Reopens

IR-2012-5, Jan. 9, 2012

WASHINGTON — The Internal Revenue Service today reopened the offshore voluntary disclosure program to help people hiding offshore accounts get current with their taxes and announced the collection of more than $4.4 billion so far from the two previous international programs.

The IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The third offshore program comes as the IRS continues working on a wide range of international tax issues and follows ongoing efforts with the Justice Department to pursue criminal prosecution of international tax evasion.  This program will be open for an indefinite period until otherwise announced.

“Our focus on offshore tax evasion continues to produce strong, substantial results for the nation’s taxpayers,” said IRS Commissioner Doug Shulman. “We have billions of dollars in hand from our previous efforts, and we have more people wanting to come in and get right with the government. This new program makes good sense for taxpayers still hiding assets overseas and for the nation’s tax system.”

The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply.  However, the terms of the program could change at any time going forward.  For example, the IRS may increase penalties in the program for all or some taxpayers or defined classes of taxpayers – or decide to end the program entirely at any point.

“As we’ve said all along, people need to come in and get right with us before we find you,” Shulman said. “We are following more leads and the risk for people who do not come in continues to increase.”

The third offshore effort comes as Shulman also announced today the IRS has collected $3.4 billion so far from people who participated in the 2009 offshore program, reflecting closures of about 95 percent of the cases from the 2009 program. On top of that, the IRS has collected an additional $1 billion from up front payments required under the 2011 program.  That number will grow as the IRS processes the 2011 cases.

In all, the IRS has seen 33,000 voluntary disclosures from the 2009 and 2011 offshore initiatives. Since the 2011 program closed last September, hundreds of taxpayers have come forward to make voluntary disclosures.  Those who have come in since the 2011 program closed last year will be able to be treated under the provisions of the new OVDP program.

The overall penalty structure for the new program is the same for 2011, except for taxpayers in the highest penalty category.

For the new program, the penalty framework requires individuals to pay a penalty of 27.5 percent of the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the eight full tax years prior to the disclosure. That is up from 25 percent in the 2011 program. Some taxpayers will be eligible for 5 or 12.5 percent penalties; these remain the same in the new program as in 2011.

Participants must file all original and amended tax returns and include payment for back-taxes and interest for up to eight years as well as paying accuracy-related and/or delinquency penalties.

Participants face a 27.5 percent penalty, but taxpayers in limited situations can qualify for a 5 percent penalty. Smaller offshore accounts will face a 12.5 percent penalty. People whose offshore accounts or assets did not surpass $75,000 in any calendar year covered by the new OVDP will qualify for this lower rate. As under the prior programs, taxpayers who feel that the penalty is disproportionate may opt instead to be examined.

The IRS recognizes that its success in offshore enforcement and in the disclosure programs has raised awareness related to tax filing obligations.  This includes awareness by dual citizens and others who may be delinquent in filing, but owe no U.S. tax.  The IRS is currently developing procedures by which these taxpayers may come into compliance with U.S. tax law. The IRS is also committed to educating all taxpayers so that they understand their U.S. tax responsibilities.

More details will be available within the next month on IRS.gov. In addition, the IRS will be updating key Frequently Asked Questions and providing additional specifics on the offshore program.