by Brian Mahany
Mention “bank secrecy” and most people think of Swiss banks. There are many other countries that are known for their financial privacy laws, however. For example, Monaco, measuring less than 1 square mile, remains a popular banking haven. Within the Arab world, Lebanon has long been known as the Switzerland of the Middle East.
Lebanon’s reputation as a banking center comes in large part from its banking secrecy laws. Like Switzerland, the laws make it extremely difficult to obtain information about accounts in Lebanon. Several years ago, however, lawmakers there passed legislation allowing banks to disclose information if money laundering was suspected. Still, there is no broad tax exchange agreement allowing foreign officials (like the IRS) to access account information.
That is about to change.
Recently Congress passed the Foreign Account Tax Compliance Act, commonly known as FATCA. Beginning next year, foreign banks are required to gather information and report to the IRS account holders who are American taxpayers. While the U.S. Congress has no jurisdiction over offshore banks, they do have the ability to freeze deposits or transfers in and out of U.S. accounts.
To avoid harsh penalties and being blacklisted, foreign banks must either agree to the new law or stop taking deposits from American individuals or businesses. Many banks have chosen the latter approach.
Lebanon’s central bank has reported that it will cooperate with American treasury officials. Lawmakers there are reportedly considering amending their bank secrecy laws to permit exchange of information where tax evasion is suspected. That still makes Lebanon a good place to hide money for asset protection purposes – just not the government.
Whether or not the new legislation is implemented, Lebanese bankers are requiring Americans to sign an authorization allowing the bank to share information with the IRS. Bank customers who refuse will have their account closed and their refusal reported to the IRS.
What does this mean for people with unreported Lebanese accounts? Plenty!
Whether or not you permit disclosure of your account, the IRS will soon know about it. Having an account in Lebanon is completely legal. Not filing annual FBAR forms (Reports of Foreign Bank and Financial Accounts) is illegal and carries huge fines and a potential prison term. Unfortunately, many foreign account holders simply do not understand the reporting requirements.
Many of our clients were born outside the U.S., hold dual citizenship or have family in other countries. These folks open or maintain accounts in their home countries for convenience and never intending to defraud the government.
Willful failure to file an FBAR carries a penalty of the greater of $100,000 per year or 50% of the high balance for each year the account isn’t reported. Willful failure to file an FBAR is also a felony punishable by up to 5 years in prison.
Presently there is an amnesty that allows the holders of unreported accounts to pay a reduced one time penalty. There are also traditional voluntary disclosure remedies in which penalties can be waived if the account holder demonstrates their failure to report was unintentional.
The rules regarding amnesty (called the Offshore Voluntary Disclosure Program or “OVDI”) are complex and the stakes are high. If you have an unreported bank or brokerage account in Lebanon, Switzerland, India or elsewhere, contact an experienced tax attorney immediately. The deadline to file FBARs this year ends on June 30th!
The tax attorneys at Mahany & Ertl have helped many taxpayers with offshore tax reporting including foreign bank accounts, FBARs, FATCA and voluntary disclosure. If you wish to have more information, contact attorney Bethany Kroes at (414) 223-0464 or by email at The author, attorney Brian Mahany, can also be contacted at All inquiries are kept in strict confidence and protected by the attorney client privilege.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS services available anywhere in the U.S. and worldwide.