Eleven foreign financial institutions to share their US customer account information

US authorities have offered eleven financial institutions a settlement agreement in which the US government’s investigations in those financial institutions — for aiding tax evasion — and potential prosecution would be dropped.

The eleven financial institutions are:

1. Credit Suisse (including Clariden Leu)

2. HSBC Holdings

3. Basler Kantonalbank

4. Wegelin & Co

5. Zuercher Kantonalbank

6. Julius Baer Group

7. Bank Leumi Le-Israel

8. Bank Hapoalim

9. Mizrahi-Tefahot Bank

10. Liechtensteinische Landesbank

11. Neue Zuercher Bank (NZB)

The terms of the US government agreement would be similar to the UBS settlement in 2009 and would require each of the eleven  financial institutions to share client data regarding US citizens and, most likely, pay a hefty fine. American officials are also concerned that these 11 banks appear to have accepted hidden money from American clients who fled UBS in the wake of its scrutiny. The scrutiny comes during a wide-ranging campaign by the Department of Justice to force nearly a dozen Swiss banks now under scrutiny to pay billions of dollars in fines collectively and to admit to criminal wrongdoing.

Handing Over Client Data

The IRS reported that eight Swiss banks, including Credit Suisse, Julius Baer, and Basler Kantonalbank turned over US client data on taxpayers suspected of tax evasion on January 30th, 2012. This does not put an end to the negotiations between the US and Swiss governments. Three more banks are still expected to turn over client data and a total of 11 banks are expected to pay heavy fines. Based on the settlement in 2009 with UBS it appears that the banks would need to turn over, at the very least, the following:

1. Correspondence between the banks and US clients (which includes notes made during telephone conversations and meetings);

2. Internal memoranda relating to US clients;

3. Correspondence between the Banks and third parties concerning US clients; and

4. Documents related to funds transferred to third parties on behalf of US clients.

Global Pursuit

The known countries involved in the US government’s far-reaching investigations include:

1. Switzerland

2. Liechtenstein

3. Israel

4. India

5. Singapore

6. Hong Kong

The risk of criminal and/or substantial civil penalties grows greater as the IRS and Department of Justice complete more bank-investigations and as foreign banks continue to co-operate with US government officials.

Offshore Voluntary Disclosure Program (OVDP)

On January 9th, 2012, the IRS re-opened its Offshore Voluntary Disclosure Program (OVDP) to encourage US taxpayers with undisclosed offshore accounts to come into compliance. The 2012 Amnesty Program is in response to continuing interest from US taxpayers after the 2009 and 2011 programs ended, making this program the third in the past three years. With the renewal of a third Voluntary Disclosure Program it seems clear that the IRS is dedicated to providing taxpayers with opportunities to come forward, which is something that US taxpayers with undisclosed offshore accounts are being urged strongly to consider in light of the recent developments. In parallel, the DoJ’s tax division continues its aggressive mission to obtain bank record information on US citizen’s offshore accounts around the world. As they describe it, the “top litigation priority is the concerted civil and criminal effort to combat the serious problem of non-compliance with our tax laws by US taxpayers using secret offshore bank accounts.”

Conclusion

The IRS and the Department of Justice’s tax division have made it clear that they are intent on taking the secret out of secret bank accounts and will prosecute anyone involved: tax payer, banker or professional advisor such as legal attorney. The risk of the IRS discovering a taxpayer’s undisclosed offshore accounts has increased manifold with far reaching bank investigations. The consequences for failure to comply with the proper disclosure and filing requirements may lead to audits, severe financial penalties, and in some cases, criminal prosecution. The US government is committed to bringing all US taxpayers with undisclosed offshore accounts into compliance regardless of the consequences for the off-shore banking industry. The European and Asian governments may follow suit in the footsteps of the US tax authorities.

Our law firm expects unabated aggressive enforcement of the US tax laws, including increased criminal prosecutions and civil audit examinations. We have been advising our clients to expect the unexpected (and the worst) in their tax treatment and disclosure of offshore assets.

Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.

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