[Updated 2021] The U.S. government is getting quite sophisticated in its hunt for unreported foreign accounts and those they believe are laundering money. While most people who haven’t reported their offshore bank and brokerage accounts don’t have a clue about the disclosure rules, some do. The people who have decided not to cooperate with the IRS often open accounts under the name of a foreign corporation and have statements sent to an address outside the United States. For many years, that sort of activity worked but times are rapidly changing.
The penalties for willfully failing to disclose an offshore account include 5 years prison and huge monetary penalties – often $100,000 per year or more. Most foreign financial accounts must be disclosed annually by filing a Report of Foreign Bank and Financial Account, more commonly called an “FBAR.” For many taxpayers, the spectre of losing all their money and a long stay in prison is enough to force them into compliance. Others, however, continue to hold out.
FinCEN, Treasury’s Financial Crimes Enforcement Network, has new rules requiring banks to determine the beneficial owners of nominee accounts. While FinCEN only has authority of U.S. financial institutions, some banking groups worry that the government will use its new FATCA law to require foreign banks to also comply.
The new Anti-Money Laundering Act passed by Congress in 2021 also raises the stakes by requiring disclosure of beneficial owner information. Corporations, limited liability company, and similar entities that are created in the United States or organized under the laws of a non-U.S. jurisdiction and registered to do business in the United States (called “reporting companies”) will be required to submit a report containing certain beneficial ownership information to the U.S. Financial Crimes Enforcement Network (FinCEN) as part of the entity formation process. The report requires the legal name, date of birth, current address, and unique identifying number from an acceptable identification document for each beneficial owner.
While the new regs have the government collecting beneficial ownership information, banks still must perform due diligence and investigate and determine the beneficial ownership of accounts within their bank.
World political pressure from the governments worldwide are forcing more transparency, however. Sooner or later banks and regulators will develop a better method of determining who controls bank accounts opened in third party names.
One of the most effective tools in the government’s arsenal are indictments aimed at bankers, lawyers and other gate keepers. Frequently these people are the first to cooperate and turn over the identities of their clients.
IRS Whistleblower Rewards and Nominee Accounts
Perhaps the biggest tool in the IRS arsenal is the IRS Whistleblower Program. That law allows ordinary people with inside information about tax evasion to collect cash rewards of up to 30% of whatever the government collects from wrongdoers.
People with unreported accounts that think they are safe from prosecution, should think again. The chances of getting caught increase everyday. We empower whistleblowers to help stop tax fraud and collect cash rewards.
Many think tax fraud is a victimless crime. Unfortunately, each dollar in tax not collected from the fraudster means honest taxpayers must make up the difference. We all hate paying taxes. The only thing worse, however, is knowing your neighbor isn’t paying his share.
To learn more, visit our IRS whistleblower information page. Ready to see if you qualify for a reward? Contact attorney Brian Mahany online, by email or by phone at 202-800-9791. IRS whistleblower cases accepted worldwide. All inquiries protected by the attorney – client privilege and kept confidential.