Another Swiss Bank Falls Into Line

23 Dec

Rothschild to Pay $45.4 mn to End U.S. Tax Probe

December 18, 2015
This was announced in today’s online.


“Edmond de Rothschild (Suisse) SA agreed to pay $45.4 million to avoid prosecution for helping U.S. clients evade taxes, admitting it aided them in moving cash and using sham offshore entities to hide money from the Internal Revenue Service. The bank will also be handing lists of their tax evading clinets

Rothschild is the 68th Swiss bank to reach an accord with the U.S. Justice Department this year, which has secured $802.3 million under a disclosure program that requires firms to say how they helped Americans cheat and where their money went.

In a non-prosecution agreement, the bank signed a statement of facts that detailed misconduct by relationship managers at Edmond de Rothschild (Suisse) and a Lugano unit that handled 950 U.S. accounts that held $2.16 billion between 2008 and 2013. In that period, Rothschild processed at least 155 cash withdrawals of $30,000 or more for 53 U.S. clients, including one that took out $2.53 million in one transaction, according to the agreement.

The relationship managers coordinated with an external asset manager who set up an offshore entity in Singapore, and they “knew or had reason to know” clients used advisers to set up structures in the British Virgin Islands, Panama and Liechtenstein, according to the pact, released Friday by the Justice Department.

Rothschild said the settlement will have no impact on its financial results. The bank links itself to seven generations of financiers who have advised royalty, governments, and railway barons for 250 years.

The bank also said in the accord that it helped clients in “covertly repatriating offshore funds” by providing credit cards, cash cards and debit cards to move money not declared to the IRS. “These services allowed U.S. clients to withdraw funds remotely or pay for goods and services without a paper trail back to their undeclared accounts in Switzerland,” according to the agreement.”

No doubt they will also reveal to the IRS the names of their clients who are possible tax evaders. Again, I contend that probably all of these tax evaders are residents of the USA and NOT EXPATS living abroad. Nevertheless, American citizens abroad will continue to come increasingly under scrutiny as possible tax cheats. FATCA marches forward.



13 Oct

If the answer to this question is yes, then they are going to catch you, fine you, and maybe even throw you in jail. You cannot escape and the noose is tightening around your neck. And I, as a law abiding expat, have no sympathy for you. You deserve to be caught and to pay for your crime. I am glad that the thought of doing such a thing never crossed my mind. Yes, I’d heard of offshore accounts and the like, but I always felt it was my duty as a law abiding citizen to pay taxes. The government was not run on air. It needed money to provide services for those in need, to protect us and to enable us to live in an orderly society. Today I read an article in Accounting Today with details about how the Justice Department is exposing those who did evade taxes and who did use the Swiss banking system’s tendency to hide the secrets of thieves and liars to hide assets in corporations, foundations or trusts in Liechtenstein, Panama, the British Virgin Islands, in Hong Kong, in Singapore and Israel, my adopted country, of which I am also a citizen. But once again, as I have stated so in the past, I emphasize that these individuals using these banks are nearly 100% residents of the USA and NOT EXPATS, LIVING ABROAD AND USING THEIR LOCAL BANKS AS FINANCIAL INSTITUTIONS TO DO THEIR EVERYDAY BANKING. I am quite sure that all of the 6 million or so expats laud the work of the Department of Justice as described in this article below and want those citizens who are giving expats a bad name to be caught and punished.

U.S. Chases Swiss Bank Secrets to Singapore and Israel

Newark, N.J. (October 12, 2015)

By David Voreacos and Giles Broom


At a rate of one or two a week, Swiss banks are doing what was once unthinkable: revealing to the world how they helped wealthy Americans cheat on their taxes.

Once bastions of secrecy, 41 Swiss banks signed amnesty agreements this year with the U.S. Justice Department that required disclosing the tricks they used to help customers hide assets, naming bankers and middlemen who enabled them and detailing the flow of untaxed money. They’ve also prodded thousands of reluctant Americans to disclose accounts hidden from the Internal Revenue Service.

Partner Insights

The flood of information is now giving U.S. investigators intelligence to try to build new cases against individuals and institutions in other countries, said Caroline Ciraolo, the Justice Department’s top tax prosecutor. Financial institutions in Singapore and Israel are possible targets, according to lawyers and prosecutors.

“The money is moving out of Switzerland to a variety of jurisdictions,” said Ciraolo, an acting assistant attorney general. “We’re following leads and following the money, wherever that leads us.”

The Swiss amnesty program is part of a tax evasion crackdown that grew after 2009 when Switzerland’s biggest bank, UBS Group AG, paid $780 million to avoid prosecution, and the U.S. began criminal investigations of 14 other banks, including Credit Suisse Group AG.

2013 Offer
Broadening the push, the U.S. in 2013 offered to forgo prosecuting any Swiss bank that came clean on tax-evasion tactics. So far this year, the 41 banks paid combined penalties of $354.5 million, with BSI SA paying the lion’s share, or $211 million. It’s the most non-prosecution agreements negotiated together, according to Brandon Garrett, a law professor at the University of Virginia who studies corporate prosecutions.

“Normally, I would be concerned about an expansion of non- prosecution agreements, but these cases really are special and difficult,” Garrett said. “It’s impressive how far U.S. prosecutors have gotten in the face of Swiss resistance.”

Martin Naville, chief executive officer of the Swiss-American Chamber of Commerce, said the settlement process has been difficult for many firms, with some feeling they’ve been “slighted and not treated very well.” But he said the penalties were smaller than what many banks had budgeted for.

That’s due in part to an unusual aspect of the amnesty program. Penalties are pegged to how many clients banks successfully pushed to reveal secret accounts and the firms that aided them. The more individuals who came forward, the less banks had to pay.

40 More
Another 40 or so banks may reach non-prosecution agreements this year, according to lawyers representing banks, as the amnesty program winds down. That will free investigators to turn to probing banks in other countries.

U.S. agents interviewed taxpayers who used a Singapore money management firm to hide assets from the IRS, said Bryan Skarlatos and Scott Michel, lawyers who separately represent some of those Americans. They wouldn’t identify the firm, and Ciraolo wouldn’t discuss it.

“Certainly, Singapore would be one of the jurisdictions that we’re looking at,” Ciraolo said.

Societe Generale SA’s Swiss private banking unit admitted in its settlement that it transferred assets of U.S. customers to “corporate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus,” according to its statement of facts. The unit paid a $17.8 million fine. A bank spokesman declined to comment.

In its settlement document, Banque Pasche SA said that client money was transferred to banks located in Israel and Hong Kong “in an attempt to further escape detection.”  An e-mail and phone call to the bank weren’t returned.

Israeli Banks
Israeli banks have drawn special focus from the Justice Department. Last year then-Deputy Attorney General James M. Cole cited “an ongoing and extensive investigation” into hidden bank accounts in Israel. Bank Leumi Le-Israel Ltd. agreed to pay $400 million to resolve its criminal case.

The data coming directly from Swiss banks are supplementing a separate trove the IRS gathered from 50,000 U.S. taxpayers who disclosed their offshore accounts and paid $7 billion in back taxes, fines and penalties since 2009.

The 41 non-prosecution agreements, posted on the Justice Department’s website, provide insight into tax-evasion tactics used by bankers in Switzerland, where it’s been a crime since 1934 to disclose client data. They opened numbered accounts to hide the true owners, held mail to avoid paper trails and let clients access their secret accounts through credit cards, a review of the amnesty statements shows. Banks also helped clients make cash withdrawals to avoid U.S. currency reporting requirements, or converted assets to gold held in safe deposit boxes.

Other Countries
Many clients disguised their money in entities set up in tax havens outside of Switzerland. Of 41 banks that settled, 18 held assets in corporations, foundations or trusts in Liechtenstein; 15 in Panama; 11 in the British Virgin Islands, and four in Hong Kong.

SB Saanen Bank AG’s agreement detailed how an unidentified private banker came to the U.S. to woo wealthy clients. In 2010 and 2011, he entertained clients at the U.S. Open tennis tournament in New York, and Saanen reimbursed for expenses such as “meals with clients at the Mandarin Oriental Hotel, the Carlyle Hotel, and other restaurants in Times Square or along the waterfront.”  The bank declined to comment on the settlement.

Some banks admitted that they accepted money from clients who were fleeing institutions that were already under investigation. Banque Pasche said it opened accounts for at least 20 U.S. taxpayers who came from (other Swiss banks under investigation, including) UBS and Credit Suisse.

Surprise Numbers
Far more Swiss banks initially signed up for the amnesty program—106—than expected, said its designer, Kathryn Keneally, who led the tax division before Ciraolo.

Banks were looking for “the finality of a resolution,” she said. They were also pushed by the Swiss Financial Market Supervisory Authority to join.

Michel, whose firm Caplin & Drysdale represents both banks and customers, said the “creative component” of the amnesty program was to deputize banks to police current and former account holders. It also placed a “huge burden” on banks to produce information about employees and intermediaries who aided tax evasion, said Thierry Boitelle, a lawyer at Bonnard Lawson in Geneva.

“The DOJ is getting some very valuable information served up on a silver platter,” Boitelle said.

U. S. Government Hacks Into Expats Financial Files

6 Oct

Oh, it’s all “legal” and condoned by Congress via the HIRE Act of 2010. Yes, you guessed it. It’s called FATCA which requires foreign financial institutions to send the IRS information on the accounts of U.S. taxpayers, or else face stiff penalties of up to 30 percent on their income from U.S. sources. How can the government of the United States of America “require” my local bank here in Israel where I live to send them everything they have in their computer systems about me? The end of the previous sentence tells it all. If my bank doesn’t cooperate, the U.S. Department of Justice will impound the investments of this small bank in the USA. The US Treasury negotiated agreements with other countries to allow for reciprocal exchange of tax information on both U.S. and foreign taxpayers from both U.S. and foreign banks, in accordance with existing tax treaties to prevent double taxation. This reciprocal exchange of tax information will flow from the banks into each country’s tax authority and through them to the IRS. Because these “agreements” are reciprocal, there will be a bidirectional flow with the Israel Tax Authority receiving everything that the US Treasury knows about me. What a massive flood of information that I am sure will clog up the computers of the IRS and the ITA. I sincerely doubt that they have thought out how to deal with all this information. Nevertheless, this is in my opinion nothing more than hacking of personal financial information by these government agencies. They whitewash it as being legal, but at best, it can be only termed quasi-legal hacking.

To meet the Sept. 30 milestone, the IRS said it developed an information system infrastructure, procedures, and data use and confidentiality safeguards to protect taxpayer data while facilitating reciprocal automatic exchange of tax information with certain foreign jurisdiction tax administrators as specified under the agreements implementing FATCA. This sounds like government gobbledygook for hacking.

So as of one week ago they have started to hack away at what was once sacrosanct, your personal financial information. Let it be said that I am in no way shape or form hiding anything from any tax authority. I do not evade taxes. I have always dutifully declared all my assets and paid appropriate levels of taxes to both tax authorities. I don’t think that it is proper for the United States to be the only country other than Eritrea that has citizen-based taxation. But until the law is changed, I comply and pay. Let them hack away all they want. May they drown in all the data.

International Conference on Taxpayer Rights to be held November 18 -19, 2015

29 Sep

This was announced back on July 10, 2015 by the Taxpayer Advocate Service of the IRS on their Tax Payer Advocate’s announcement. I sure hope it turns into something that has a substantial positive influence on how the IRS deals with us small fish Expat taxpayers. We’ll see. Keep on the alert for what they discuss and any influence it may have on the IRS and US Congress.

The National Taxpayer Advocate of the U.S. Internal Revenue Service is convening the Inaugural International Conference on Taxpayer Rights in Washington, D.C.

This ground breaking conference will explore how taxpayer rights globally serve as the foundation for effective tax administration.

Inaugural International Conference on Taxpayer Rights: The Bedrock of Tax Administration

Washington, DC ▪ November 18-19, 2015

Government officials, scholars, and practitioners from many countries will discuss issues such as:

  • Rights to confidentiality and privacy in an age of transparency;
  • Right to appeal to an independent forum: the role of tax tribunals in protecting taxpayer rights;
  • Taxpayer rights and procedural justice in audit and collection activities;
  • Impact of taxpayer service on compliance;
  • Role of taxpayer advocates, defenders, and ombuds in protecting taxpayer rights and promoting voluntary compliance; and
  • Challenges in “operationalizing” taxpayer rights in both mature and developing tax administrations.

More information and registration coming soon.

Questions? Email us.

This conference is co-sponsored by the American Bar Association Section of Taxation, the American College of Tax Counsel, the American Tax Policy Institute, the International Association of Tax Judges, and the International Fiscal Association – USA Branch. Tax Analysts is the publishing sponsor of the conference.

Save The New Date For Your FBAR

18 Aug

FBAR Deadline Moves Up 3 Months to April 15

By Shannon Smith Retzke and Aaron D. Schumacher

I just saw this on and it is worth changing the date on your calender of deadlines for next year’s tax reporting. The bottom line is not to wait until June 30th to submit your FBAR. It’s the beginning of the end of the filing date disconnect between foreign bank account reports and income tax returns.

On July 31, President Obama signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 into law, which modified the due date of several key forms for Americans with foreign income and Americans living abroad.

That includes the Report of Foreign Bank and Financial Accounts, or Form 114, colloquially known as the FBAR. Any U.S. person with a financial interest in, or signatory authority over, foreign financial accounts must file the FBAR, if at any time, the aggregate value of their relevant foreign account or accounts exceeds $10,000. An account over which a person has signature authority but no ownership interest is included in this computation.

The FBAR gained notoriety in 2008 when UBS, responding to pressure from the U.S. Department of Justice, disclosed the identities of thousands of U.S. holders of Swiss accounts.

Failure to file an FBAR may result in a civil penalty of up to $10,000 for negligent violations, or up to the greater of $100,000 or 50 percent of the account balance for willful violations. Failure to comply with the e-filing mandate may result in a separate $500 penalty. The new law did not change the requirement that the FBAR be filed electronically with the Bank Secrecy Act form (as opposed to together with a tax return to a service center), nor did it eliminate the requirement to file a Form 8938 with a tax return reporting certain foreign holdings.

New Due Date
The Act states that the Secretary of the Treasury, or the Secretary’s designees, shall modify appropriate regulations to provide that “[t]he due date of FinCEN Report 114 (relating to Report of Foreign Bank and Financial Accounts) shall be April 15 with a maximum extension for a 6-month period ending on October 15 and with provision for an extension under rules similar to the rules in Treas. Reg. section 1.6081–5.”

This is a good first step toward an integrated system. For filers living in the U.S., this change in the law will coordinate the timing of their FBAR submission with the timing of their income tax return. The FBAR will be due April 15, along with their Form 1040. If they apply for an extension of six months until October 15, the FBAR will also be due on October 15.

For Americans living abroad, the reference in the Act to Treas. Reg. section 1.6081–5 will allow for the coordination of the FBAR due date to the June 15 deadline (after automatic extension) for the coordinating income tax return.

Please note, this extension only comes into effect for the 2015 FBAR (now due April 15, 2016). It does not apply to taxpayers who missed the June 30, 2015 filing deadline for their 2014 FBAR.

New Penalty Waiver Provisions
Of particular interest for individuals who have made a minor foot fault in the first year of filing an FBAR, the Act states that “[f]or any taxpayer required to file such Form for the first time, any penalty for failure to timely request for, or file, an extension, may be waived by the Secretary.” This is a significant deviation and may provide some degree of comfort to those taxpayers who have just learned of filing obligations. Other options exist to correct filing deficiencies, and should be considered in light of all the facts and circumstances with your tax professional.