Another Bank Added to IRS Known Banks List, More U.S. Taxpayers In Jeopardy

Early last month, we broke the news that the IRS had updated their known banks list to include five more financial institutions. In a move that should concern any taxpayer that is an accountholder of an overseas bank account that has not yet been disclosed to the federal government, the IRS has added yet another bank to the list. The constant additions to the known IRS banks list are evidence of the changing mentality of foreign financial institutions on the issues of bank secrecy and the threat of international criminal prosecution.

What is the IRS Known Banks List and Why is it Important?

The known banks list is compiled by the IRS and represents a collection of financial institutions that is known by the Untied States to help American taxpayers set up and maintain secret bank accounts and in some circumstances, keep them hidden from U.S. government officials. Foreign banks are generally added to the list when they have entered a non-prosecution (also known as a deferred prosecution) agreement with the Department of Justice. Under the terms of those agreements, the bank agrees to fully comply with the United States in their effort to investigate Americans that hold undeclared accounts overseas.

When a taxpayer is found to have failed to disclose their foreign bank account to the IRS, the penalty associated with the failure the penalty is generally 27.5 percent. But when a taxpayer is found to have acted willfully, the penalty is increased to 50 percent of the high-balance of the account. If the account was or is established at one of the institutions on the known banks list, the taxpayer’s actions are deemed to be willful and the higher penalty is applied.

Although some of the banks participating in the program have shown discontent for the terms, most have come to realize that they are in no position to bargain. The prosecution and threat of criminal action against several Swiss banks has demonstrated that the United States is taking the issue very seriously and that they are willing to take nearly any action to see the enforcement effort through. With the lack of leverage, banks in Switzerland and beyond can either jump on the ability to avoid prosecution by participating in the program or risk being uncovered and prosecuted; a course of action that some banks have tried and has caused at least one bank to shut its doors for good.

According to a Department of Justice press release distributed last Friday, Ersparniskasse Schaffhausen AG entered into a non-prosecution agreement and the bank has been added to the known banks list. The addition brings the full list of known banks to 26. The updated list is included below:

1. UBS AG
2.  Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3.  Wegelin & Co.
4.  Liechtensteinische Landesbank AG
5.  Zurcher Kantonalbank
6.  swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9.  The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10.  The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
11.  Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12.  Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15.  Finter Bank Zurich AG (effective 5/15/15)
16.  Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17.  MediBank AG (effective 5/28/15)
18.  LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15)
20. Rothschild Bank AG (effective 6/3/15)
21.  Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
23. Berner Kantonalbank AG (effective 6/9/15)
24.  Bank Linth LLB AG (effective 6/19/15)
25.  Bank Sparhafen Zurich AG (effective 6/19/15)
26. 26. Ersparniskasse Schaffhausen AG (effective 6/26/15)

With the Foreign Account Tax Compliance Act (FATCA) in full effect, taxpayers are too left with few options as to whether they should get clean with the IRS. FATCA’s online information data exchange has provided the IRS with a constant stream of account information from sources around the world. For taxpayers who are interested in avoiding criminal prosecution under the Foreign Bank Account Reporting laws through the Offshore Voluntary Disclosure Program (OVDP), the information data exchange poses a huge threat. If the IRS receives information about a taxpayer’s foreign bank account and begins to investigate the lead, the taxpayer is no longer eligible to participate in the OVDP. Further, even if the IRS is examining your tax affairs for an unrelated issue, the OVDP is unavailable.

Contact an Experienced IRS Tax Attorney Today

If you have an undisclosed foreign bank account, it is in your best interest to contact a tax attorney to assess your options. The tax and accounting professionals at the Tax Law Offices of David W. Klasing have years of experience helping taxpayers make the right moves to keep their physical and financial freedom. Attempting to handle an undisclosed foreign account on your own is not only risky financially; one wrong move could land you in prison as willfully failing to disclose a foreign account is a criminal offense. Allowing a tax attorney zealously advocate for your interests is the best first step toward a positive outcome. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.