For decades Swiss banks have been a bastion of secrecy and non-disclosure, but this is no longer the case. Swiss banks became world famous for their common practice of not disclosing accounts owned by foreigners to their respective taxing authorities. While I have written extensively about the need for taxpayers with overseas accounts to take advantage of the Overseas Voluntary Disclosure Initiative (OVDI), to avoid criminal liability, that is only half of the Swiss bank story. Swiss banks (along with banks the world over that may have committed tax crimes similar to those committed by Swiss banks) are also clamoring to disclose your accounts to the IRS to reduce their liability.
Pursuant to non-prosecution agreements with U.S. prosecutors, many Swiss banks (and banks the world over) are giving the IRS information about U.S. account holders. Under the non-prosecution programs, Swiss programs were required to agree to pay penalties of between 20% and 50% of the value of a depositors’ accounts depending on the opening date. In light of such stiff penalties, Swiss banks are seeking to maximize their opportunities mitigate these penalties. Swiss banks can eliminate the penalty for each account by: 1) showing that account was disclosed, 2) disclosing account information, 3) or the showing that the account holder has entered into the Overseas Voluntary Disclosure Initiative.
Swiss banks are trying to disclose account information. Bank secrecy in Switzerland was legislated in the Swiss Banking Act of 1934. Swiss banks had a legal duty not disclose information about account holders, similar to countries such as Lebanon, Singapore, Luxembourg, as well as other offshore tax havens. A recent development has been the waiver of secrecy requests sent out by Swiss banks. Many of these banks are requesting that clients waive their right to secrecy under the Swiss Banking Act of 1934. This would allow Swiss banks to disclose your information to the IRS and eliminate the penalty for your undisclosed account.
Tax attorney David W. Klasing recommends that you take full advantage of these non-prosecution programs before your Swiss bank does. By waiving your rights to bank secrecy, your Swiss bank (Or any foreign bank that participates) will disclose your Swiss bank account to the IRS to eliminate the penalty associated with holding your account. As we have discussed extensively in the past, the IRS typically reserves its discretion not to prosecute non-filers who voluntarily disclose their non-filing per the OVDI. If your bank discloses your accounts, the IRS may not view your disclosure as voluntary. Klasing recommends taking full advantage of this discretion by making a “noisy” disclosure via the Overseas Voluntary Disclosure Initiative (OVDI). By participating in the OVDI, you can minimize civil penalties and eliminate criminal liability.
Do not let your Swiss bank claim the benefits of disclosure before you do. Do not let their self-interested motives let you put yourself in the IRS’s crosshairs. Make your voluntary disclosure on your own terms. The Tax Law Offices of David W. Klasing can help you follow the Overseas Voluntary Disclosure Initiative process to eliminate your criminal liability. Contact us today.
