Swiss Bank Gives Up More Names of American Customers, Faces Increased Penalties

The Foreign Bank Account Reporting laws (FBAR) require U.S. residents to report, on an annual basis, accounts held at foreign financial institutions if such account’s high balance reaches or exceeds $10,000 at any point in the year. Although FBAR laws have been on the books for many years, the IRS, State Department and Department of Justice have only recently begun strictly enforcing them. Penalties for willful noncompliance can land an offender in prison for several years and penalties can be as high as 50% of the high-balance of the account of each account that went undisclosed.

Many joke about hiding money in offshore accounts as a legitimate way to keep Uncle Sam out of your wallet, but for the United States Treasury, undeclared foreign bank accounts are a big problem. So much so that the federal government decided that only going after the Americans suspected of holding undeclared offshore accounts wasn’t enough. The scope of the government’s enforcement actions widened to include the foreign banks that housed the accounts in question. Most of those banks have rolled over on their customers and are providing incriminating information to the federal government, that could be used in the prosecution of thousands of Americans, not just in Switzerland but the world over.

The Swiss Bank Program

The Swiss Bank Program was developed in 2013 in an attempt to encourage Swiss foreign financial institutions to come forward and provide identifying information about U.S. residents who owned foreign bank accounts that had not been disclosed to U.S. authorities, as required by federal law. In short, the program allows for Swiss banks to avoid criminal prosecution in exchange for the disclosure of all of its U.S.-related accounts that were open at each bank between August 1, 2008, and December 31, 2014. Additionally, participating banks were required to pay a Swiss Bank Program penalty.

Considering the Swiss Bank Program to be a success, the Department of Justice has touted that the program has resulted in participation by 80 banks. Swiss Bank Program penalties collected were estimated to exceed $1.36 billion.

As time has gone on, the Department of Justice and IRS learned that some of the participating banks were not exhaustive in providing information about U.S. account-holders. According to a Department of Justice press release, Bank Lombard Odier & Co. Ltd. was an original participant in the Swiss Bank Program and initially paid approximately $99 million in penalties, in addition to handing over identifying-information about its U.S. customers. It turns out that Bank Lombard Odier came forward and acknowledged that there were certain additional U.S.-related accounts that it knew about, or should have known about, but that were not disclosed to the Department at the time of the signing of the non-prosecution agreement. Although Bank Lombard Odier identified the mistake, alerted the U.S. government, and participated with the Department of Justice, they still paid an additional $5.3 million in penalties relating to the mistake.

It should come as no surprise that the government is not slowing down in its efforts to crack down on Americans with undeclared foreign bank accounts. Recently, the IRS announced that its popular Offshore Voluntary Disclosure Program (OVDP) would come to an end on September 28, 2018. Much like the Swiss Bank Program, the OVDP allows taxpayers to come forward and provide information about accounts that were undeclared, pay any back-taxes, interest, and a penalty, in exchange for what amounts to an amnesty against criminal prosecution if the terms of the program are complied with and the program applicant qualifies for the program.

Americans with foreign bank accounts that have not been disclosed in accordance with FBAR laws which is often coupled with, unreported foreign sources of investment, inheritance or business income, should consult an experienced tax attorney to identify options to come into tax and foreign information reporting compliance. As more banks, Swiss and otherwise, hand over identifying information about U.S.-owned foreign accounts, the chances of being caught increase exponentially. If the OVDP is a viable option for you, an experienced tax lawyer can assist in ensuring that necessary paperwork is filed before the Program’s end date. It is unclear if the IRS will replace the OVDP with a similar program, but one thing is for certain: the federal government is not slowing its FBAR enforcement efforts. Additionally, where the IRS has ended prior versus of the program, successive versions increased the applicable penalties that will apply and no guarantee can be made that a new version of the OVDP will eventually be provided.

Contact an International Tax Lawyer Today

The tax and accounting professionals at the Tax Law Offices of David W. Klasing have extensive experience in assisting taxpayers to participate in the OVDP, streamlined voluntary disclosure and similar programs to come into compliance with federal tax and information reporting requirements. Our team of zealous advocates is ready to assist in the development of a strategy to minimize the negative effects of coming into compliance with state and federal tax laws. Don’t lose sleep over your tax troubles. Contact the Tax Law Offices of David W. Klasing today for a reduced-rate consultation.

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