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Eight New Financial Institutions Enter Swiss Bank Program

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    The Department of Justice was extremely busy last week in finalizing contractual relationships with Swiss banks that have opted to enter the DOJ’s Swiss Bank Program. The large addition to the program participants signals an extremely dangerous situation for U.S. taxpayers who have an ownership interest or signature authority over undeclared accounts outside of the United States. If you have such an interest in a foreign bank account, it is in your best interest to contact an experienced tax attorney to discuss your options. It is only a matter of time until he IRS uses the information that it procures through the Swiss Bank Program in order to prosecute any remaining taxpayers with secret bank accounts.

    Under federal law, taxpayers are required to disclose the existence of foreign bank accounts that they have ownership interest in, or signature authority over, that have reached or exceeded a $10,000 balance at any point in the year. Those who willfully violate the Foreign Bank Account Reporting (FBAR) laws can be criminally prosecuted and sentenced to several years in federal prison for each year that the foreign account went undisclosed. The Swiss Bank Program, combined with agreements made after the passage of the Foreign Account Tax Compliance Act (FATCA) have paved the way for the IRS and Department of Justice to go after Americans who have failed to follow the law.

    Over the past week, Edmond de Rothschild (Suisse) SA and Edmond de Rothschild (Lugano) SA (collectively EdR Switzerland), Bordier & Cie Switzerland (Bordier), PBZ Verwaltungs AG (PBZ), PostFinance AG, Crédit Agricole (Suisse) SA (CAS), Dreyfus Sons & Co Ltd, Banquiers (Dreyfus), and Baumann & Cie, Banquiers (Baumann) have reached agreements under the terms of the Swiss Bank Program.

    The Swiss Bank Program, established in mid-2012, is a way for Swiss banks to come forward and avoid criminal prosecution by disclosing their operations that relate to U.S. customers. Under the program, banks are required to:

    • Make a complete disclosure of their cross-border activities;
    • Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
    • Cooperate in treaty requests for account information;
    • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
    • Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
    • Pay appropriate penalties.

    In addition to the above requirements, the new entrants are required to participate in any and all civil and/or criminal legal proceedings that are brought in the United States. New entrants of the Swiss Bank Program are also required to develop and communicate their plan to prevent U.S. taxpayers from using their financial institutions to hide money from the U.S. government.

    Each of the banks listed above performed traditional Swiss banking activities and marketed their products to American customers. Some of the banks made it a point to travel to the United States to pursue business leads. The banks knew or should have known that their American customers had U.S. reporting requirements that were not being complied with, but nonetheless continued to service their accounts. Each of the banks will pay a pecuniary penalty as a condition of entrance into the Swiss Bank Program.

    In addition to the new entrants to the Swiss Bank Program sending the IRS and Department of Justice extensive information about Americans that utilized their services, the banks will be placed on the List of Foreign Financial Institutions or Facilitators. This list is kept by the IRS and is used to determine whether a taxpayer willfully failed to disclose their foreign bank account. Although the IRS or Department of Justice have not come forward with a true definition of “willful”, they have indicated that taxpayers with accounts at the financial institutions identified on the IRS list will be considered to have violated the law willfully.

    If there is any good news with regard to this story, it is that for many taxpayers, there still may be time to come forward and mitigate any potential criminal or civil liability due to undeclared foreign bank accounts. The Offshore Voluntary Disclosure Program (OVDP) allows taxpayers to come forward, pay any back taxes that may be owned, interest, and penalties in order to avoid a criminal prosecution. But the OVDP is time-sensitive. Taxpayers who are already being investigated by the IRS for any tax-related issue may not be eligible for the program. Thus, if you or a loved one has an interest in a foreign bank account that has not been declared to the United States, it is in your best interest to contact an experienced tax attorney as soon as possible to assess your options.

    Contact an Experienced Tax Attorney

    The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers with interests in foreign bank accounts that have yet to be disclosed. Our staff will work with you to gather information, create a strategy, and execute a plan to minimize or eliminate your criminal or civil liability. Many taxpayers fail to appreciate the importance of seeking the guidance of a tax attorney and believe that they may be able to resolve the situation on their own. The IRS and Department of Justice send their very best to investigate and prosecute taxpayers. Ensure that you have a team of tax and legal professionals to zealously advocate for your interests. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

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