Recently we received a telephone call from a person who had a family member holding an unreported UBS account in Belgium. Should her family member be worried, she asked? Yes!
UBS was the first of many offshore banks to be targeted by the IRS. In June of 2008, U.S. Justice Department officials began a criminal investigation of the Swiss banking giant. That investigation was prompted by a whistleblower, Brad Birkenfeld, who claimed that UBS was helping Americans hide money and avoid taxes.
Later that year, a federal grand jury indicted Raoul Weil, a member of UBS’ executive committee and head of its Global Wealth Management division. The government would subsequently enter into a deferred prosecution agreement with the bank itself and collect a record $780 million fine. The government also demanded the names of the estimated 52,000 Americans with offshore UBS accounts.
Mainstream media talks about unreported UBS accounts in Switzerland but UBS has offices in 50 countries. While folks doing business with UBS branches in the United States need not worry about reporting those accounts, those doing business with UBS in any of the 49 other countries should be very worried.
Federal law requires U.S. taxpayers holding or controlling more than $10,000 in foreign financial assets to report those assets on a Report of Foreign Bank and Financial Accounts – FBAR for short. Willful failure to file an FBAR is a felony and also carries huge civil penalties. The risks of criminal prosecution are low for most people but the chances of getting caught and being required to pay enormous civil penalties are quite high. The risks for those with unreported UBS accounts are even greater.
What are the penalties? The civil penalty for willful failure to file an FBAR and having an unreported UBS account is up to the greater of $100,000 or 50% of the highest account balance per year, per account. Typically, the IRS only assesses those penalties on one year but we have reported cases where the IRS has assessed civil penalties greater than the account balance!
Most of the UBS criminal prosecutions to date have involved Americans with unreported UBS accounts in Switzerland. Earlier this summer, however, the IRS prosecuted an Illinois businessman with an account set up through UBS Jersey, in the Channel Islands.
The Bailiwick of Jersey is a small nation with a population far less than most American cities (97,000). Although tiny in size and population, it is an important European financial center and location of several UBS offices. Peter Troost, the owner of a grave marker business in Skokie, Illinois, decided it was the ideal “off the map” location to open a foreign bank account. He consulted with a UBS representative and opened an account there. Unfortunately, Troost did not report his account and did not file FBARs. This summer he was sentenced to a year in prison.
In addition to the prison term, Troost paid about $1 million in back taxes and $3.75 million in penalties.
Prosecutors argued that “Troost did not evade his taxes out of financial need or desperation. He operated a profitable and successful business; he had more than enough money to pay his taxes. He made a deliberate, conscious decision not to do so.”
Chicago’s U.S. Attorney says that Troost’s prosecution directly stems from information turned over to the IRS as part of the 2008 – 2009 criminal investigation of UBS.
The IRS operates on a system of voluntary compliance. Generally, people who come into compliance before they are contacted by the IRS can avoid criminal prosecution. Taxpayers with unreported offshore accounts who come into compliance before their names are turned over to the IRS by foreign banks can also take advantage of IRS amnesty programs including the Offshore Voluntary Disclosure Program (OVDP).
If you have 1 or more years of unfiled FBARs or have an unreported UBS account (or any unreported offshore account), speak with an experienced FBAR lawyer immediately. The stakes are very high and FATCA – the Foreign Account Tax Compliance Act – will soon require every bank worldwide to report American account holders to the IRS.
To speak with a lawyer and learn more information about your options and responsibilities, contact us today. Our team of IRS lawyers has helped taxpayers across the world with FATCA and FBAR problems. We usually offer flat fees for our services. Because we handle many of these cases, we can offer our services for less cost than many other tax lawyers.
To schedule a review of your options, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. The author can also be contacted at or by telephone at (414) 704-6731.
Post by Brian Mahany, Esq.