Under a series of tax laws, intergovernmental agreements (IGAs), and international treaties, such as the Foreign Account Tax Compliance Act (FATCA), offshore banks are obliged to report certain U.S. account holders to the Internal Revenue Service. While this requirement applies to foreign financial institutions (FFIs) around the world, Swiss banks have received some of the U.S. government’s closest scrutiny – and some of the highest penalties. Continuing this trend is HSBC Private Bank (Suisse) SA (HSBC Switzerland), which in December became one of the latest Swiss banks to enter a deferred prosecution agreement (DPA) with the United States, according to a Department of Justice (DOJ) press release. Under the terms of the DPA, HSBC Switzerland must pay more than $192 million in penalties – compensation for “conspiring with U.S. taxpayers to evade taxes” by “concealing their offshore assets and income from U.S. taxing authorities” such as the IRS. If you have an account with HSBC Switzerland or other Swiss banks, or if you received a FATCA letter from your bank, you should discuss your foreign account reporting requirements with an experienced FATCA attorney – before you find yourself at the center of a foreign account tax audit (or worse, a criminal investigation).
To regular readers, HSBC Switzerland’s DPA will likely sound like part of a familiar pattern, which reaches back at least as far as 2013. That year, the Department of Justice partnered with the Swiss government to announce an initiative known as the Swiss Bank Program, which – not unlike a voluntary disclosure – enabled participating FFIs to avoid prosecution by paying penalties, supplying information, and meeting other conditions.
Though the Swiss Bank Program was completed in 2016, as the DOJ originally announced here, numerous banks were investigated and penalized – often heavily – during its active period, continuing after the program ended. Just consider the timeline below, which only begins to scratch the surface:
In fact, just weeks after HSBC Switzerland entered its DPA, the DOJ announced that yet another Swiss bank – this time, Geneva-based Union Bancaire Privée, UBP SA (UBP) – would enter an amended non-prosecution agreement with the DOJ (subject, notably, to an additional $14 million fine).
According to the Department of Justice, HSBC Switzerland admitted to taking deliberate actions to “1) defraud the United States with respect to taxes; 2) commit tax evasion; and 3) file false federal tax returns” during the period from 2000 to 2010. The fraud reached its height in 2007, at which time the bank was, as HSBC Switzerland later acknowledged, holding more than $1 billion on behalf of U.S. clients. In an effort to conceal the fraud, the bank made extensive use of tax havens, including Panama and Liechtenstein, in which “nominee entities [were] established” to disguise the accounts’ true owners.
Under its DPA with the Department of Justice, HSBC Switzerland must pay a penalty exceeding $192 million. The penalty is comprised of three separate fines, including 1) over $60 million in restitution to the IRS; 2) a penalty of nearly $72 million, equivalent to “fees (not profits) that the bank earned on its undeclared accounts”; and 3) an additional penalty of nearly $60 million.
The Swiss Bank Program may be over, but, as the case against HSBC Switzerland exemplifies, the IRS and DOJ are continuing to exert steady pressure, endangering not only FFIs, but potentially, U.S. clients who bank with them. If you bank or invest with any Swiss FFI, you may be on the IRS’ radar already. The safest course of action is to consult with a trusted tax professional, like the international tax law attorneys at the Tax Law Office of David W. Klasing.
Is your Swiss bank under investigation? Have you received an IRS notice regarding a foreign account audit, or a FATCA letter from your bank? Do you have unreported offshore accounts or investments, including checking accounts, savings accounts, mutual funds, hedge funds, partnership interests, or life insurance?
If you answered “yes” to any of these questions, you may be in danger of FATCA or FBAR penalties. Work with an experienced FBAR attorney who can help you avoid or minimize tax penalties by reporting your offshore accounts properly. At the Tax Law Office of David W. Klasing, we have more than 20 years of experience assisting expats, dual citizens, non-residents, and offshore account holders with international tax compliance issues. For a reduced-rate legal consultation with an FBAR tax compliance lawyer for expats living abroad in Switzerland or Swiss bank account holders, contact the Law Offices of David W. Klasing online, or call 24 hours at (800) 681-1295.
Note: As long as a taxpayer that has willfully committed tax crimes self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax prosecution, the taxpayer can be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously receive a break on the civil penalties that would otherwise apply. It is imperative that you hire an experienced and reputable tax defense attorney to take you through the voluntary disclosure process. As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results. See our Testimonials to see what our clients have to say about us!
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