Most of our blog postings focus on work that is being done by the United States to curb the establishment and maintenance of secret foreign bank accounts, but the IRS and Department of Justice are not the only law enforcement agencies that are vigorously fighting tax criminals. The rest of the world has taken aim at undeclared foreign bank accounts. One of the most notable whistleblowers with regard to Swiss banks is Hervé Falciani. Earlier this week, Falciani failed to appear in a Swiss court to answer claims by prosecutors that his leak of voluminous amounts of tax records to foreign tax investigators was illegal. Falciani’s treatment should be of concern to U.S. taxpayers who have undeclared foreign bank accounts as it appears that many foreign governments have attempted to protect whistleblowers like Falciani.
Between 2000 and 2008, Falciani worked as an IT employee for the Swiss banking giant HSBC. Beginning in 2006, he is alleged to have stolen data that detailed account information for over 130,000 customers around the world. Although Falciani eventually handed the stolen information over to foreign tax enforcement agencies, he originally shopped the data around Lebanon with the aim of selling to banks or other businesses. His massive lists of HSBC customers and information regarding their accounts didn’t garner any serious interest by financial institutions and Swiss authorities quickly found out about the security breach and sought to question Falciani. Knowing that he had made plenty of enemies in Switzerland and faced jail time if he remained there, Falciani offered his stolen data to French and other European tax officials.
Although Falciani was arrested in Spain back in 2012, Spanish law enforcement refused to extradite him. Once released, he headed to France, where French authorities also were unwilling to force him back to Switzerland to answer the claims of prosecutors. Falciani was notified that a trial would begin on Monday but he notified Swiss prosecutors that he wouldn’t be in attendance for the October 12th court date nor would he be present for any other scheduled hearings.
The information provided by Falciani has sent many Europeans to prison for tax evasion and has resulted in taxpayers being ordered to pay back billions of Euros to taxing authorities. There are several points that are identified by Falciani’s actions and corresponding treatment by authorities that should cause concern among any U.S. taxpayers that have foreign bank accounts that haven’t yet been declared to the IRS. First, Falciani proved that a treasure trove of incriminating information is only a few keystrokes away. Second and more importantly, it doesn’t appear that foreign governments are willing to prevent the behavior of whistleblowers like Falciani. The message that is being sent to the public by France, Spain, and other European nations is: if someone helps us out by sharing potentially incriminating information, we won’t extradite you to face charges even if your conduct was illegal. This message may encourage other potential whistleblowers to break laws in order to obtain data and seek asylum elsewhere.
U.S. taxpayers who have undeclared foreign bank accounts are in violation of U.S. law and if convicted for willfully keeping a foreign account secret, could face an extended sentence in a federal prison. The IRS has created a program that aims to allow taxpayers who are violation of Foreign Bank Account Reporting laws to come forward and get right with the government while ensuring that they will not be sent to prison. The terms of the Offshore Voluntary Disclosure Program involve a U.S. taxpayer providing detailed information about their foreign account, paying back taxes, interest, and a penalty in exchange for an agreement that the taxpayer will not be criminally prosecuted for the failure to comply with FBAR laws. But the OVDP is time-sensitive. Taxpayers who have an investigation open against them for any reason (whether it be a criminal investigation or a simple examination) are generally not eligible to participate in the program.
The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers with a plethora of tax issues including participation in the OVDP, which can be a complicated process for the ordinary taxpayer. We also provide effective representation at examinations, investigations, and during the entire process of litigation. When the IRS and Department of Justice knock on your door, they are sending their very best. Ensure that you have an experienced tax law team to zealously advocate for your best interests. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.