Department of Justice Reminds Swiss Banks That Time is Running Out to Participate in a Non-Prosecution Agreement

Department of Justice Reminds Swiss Banks That Time is Running Out to Participate in a Non-Prosecution Agreement

In a November 5, 2013 post in The Justice Blog, the United States Department of Justice (DOJ) Tax Division issued a reminder to Swiss Banks that their time is running out to enter into a non-prosecution agreement with the United States.  Eligible Swiss Banks have until December 31, 2013 to seek a non-prosecution agreement with the United States.  This program is just the latest of several in the past five years to encourage information sharing with the U.S. government and demonstrates the DOJ’s continuing efforts to seek out individuals it believes are evading their U.S. tax and reporting obligations.

The DOJ announced the program in an August 29, 2013 press release to encourage Swiss banks to cooperate with ongoing investigations relating to the use of foreign bank accounts to commit tax evasion by U.S. taxpayers.  At that time, the Swiss government released a joint statement with the United States encouraging banks to participate in the program.  The DOJ believed that this program would “significantly enhance” their efforts to pursue U.S. taxpayers believed to have hid assets outside of the United States.  The program is only open to banks; individuals cannot participate in this particular program.  Additionally, any bank currently under
criminal investigation for their Swiss banking activities cannot participate in this program.

Under the program, a participating Swiss bank would have to: 1) agree to pay penalties; 2) make a complete disclosure of their activities with U.S. taxpayers; 3) provide specific account information for accounts with a direct or indirect interest held by a U.S. taxpayer; 4) cooperate in treaty requests for information; 5) provide detailed information regarding transfers to other banks that transferred funds into secret accounts or accepted funds when secret accounts were closed; and 6) agree to close accounts of all accounts holders who do not comply with U.S. reporting obligations.

The penalty regime under this program is based on non-disclosed U.S. accounts held by the bank.  For non-disclosed accounts held by banks on August 1, 2008, the penalty is 20 percent of the aggregate dollar value of all non-disclosed U.S. accounts.  The penalty increases to 30 percent for accounts opened after August 1, 2008 but before the end of February 2009, and the penalty increases again to 50 percent for accounts opened later than February 2009.  For banks meeting certain criteria regarding internal due diligence, the Department of Justice may issue non-target letters.

The DOJ’s ability to gather information regarding U.S. accounts which have been transferred to other banks significantly increases their ability to find individuals continuing to avoid their reporting obligations.  DOJ indicated that they increased their global enforcement activities to places like India, Luxembourg, Israel and the Caribbean.  While this recently announced program is not available to individuals that want to come into compliance with their U.S. reporting and tax paying obligations, the Offshore Voluntary Disclosure Program is still available.  However, once the IRS receives taxpayer specific information regarding non-compliance with the tax laws or Title 31 filing obligations, that taxpayer will no longer be eligible for the protections of the Offshore Voluntary Disclosure Program or the IRS criminal voluntary disclosure procedure.

U.S. taxpayers with undisclosed foreign accounts -whether the institution servicing those accounts may be eligible for the Swiss bank non-prosecution agreement or not- should seek legal counsel immediately to evaluate whether they should apply to make a voluntary disclosure. Andreozzi Bluestein LLP can provide legal counsel regarding foreign accounts and the various compliance initiatives offered by the IRS.  Voluntary disclosure initiatives offered by the IRS can provide certainty regarding civil penalties and protection against criminal prosecution.

By: Michael J. Tedesco

Disclaimer

This communication is for general informational purposes only which may or may not reflect the most current developments. It is not intended to constitute legal advice or a recommended course of action in any given situation. This communication is not intended to be, and should not be, relied upon by the recipient in making decision of a legal nature with respect to the issues discussed herein. The recipient is encouraged to consult an independent licensed attorney before making any decision or taking any action concerning the matters in this communication. This communication does not create an attorney-client relationship between Andreozzi Bluestein LLP and the recipient.

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