WikiLeaks May Impact US Offshore Account Holders
The website, WikiLeaks, has become a controversial news phenomenon. WikiLeaks publishes secret, private, and classified information primarily with respect to government practices. Its recent communication however, brings the impact of its disclosures to the doorsteps of individual citizens. On January 17, WikiLeaks stated that it intends to disclose the foreign bank account information of over 2,000 foreign bank account holders.
The foreign account information was leaked by Rudolf Elmer, a former Swiss banker of Julius-Baer in the Cayman Islands, who claims the data will show that the Cayman account holders were engaged in tax evasion. Elmer now faces charges for violating Swiss bank secrecy laws but pledges to challenge the propriety of such laws in the European Court of Human Rights and Swiss courts.
The pending WikiLeaks disclosure poses a significant concern for U.S. persons who are offshore account holders amidst increased Internal Revenue Service (IRS) and Department of Justice (DOJ) offshore initiatives. U.S. laws enacted under the Bank Secrecy Act of 1970, provide that U.S. persons who fail to file foreign bank account reports (commonly known as FBAR reports) disclosing the existence of their offshore accounts face both criminal and civil penalties. Willful violations can lead to penalties of the higher of $100,000 or 50% of the balance held in the foreign account per violation. Civil penalties may be as low as $500 per violation, depending on the amount in the account, or as high as $10,000 per violation. These FBAR requirements extend to domestic partnerships, corporations, estates and trusts. The U.S. Financial Crimes Enforcement Network (FinCEN) is also actively assessing penalties against U.S. banks for Bank Secrecy Act violations.
Persons who own offshore assets, in general, are advised to contact a licensed professional to discuss their reporting requirements and disclosure options. The IRS continues to accept voluntary disclosures from persons who come forward before the IRS becomes aware of their foreign account (for example, via WikiLeaks, the upcoming UBS deferred prosecution agreement, whistleblowers, or some other form of disclosure) and such persons may be entitled to inoculation from the inference of criminal intent and reduced FBAR penalties. Very shortly the IRS is expected to announce its third FBAR voluntary disclosure program. The new initiative is likely to offer reduced FBAR penalties. Taxpayers who have already filed disclosures under the preexisting voluntary disclosure program may be entitled to take advantage of the reduced penalty framework.
Andreozzi Bluestein LLP can provide your legal counsel needs regarding these foreign accounts and the compliance initiative.
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