For over a century, Switzerland prided itself on its tradition of privacy and bank secrecy. Countless dictators and criminals have stashed money there. Ditto for tax cheats. Even the Nazi’s used Swiss banks to stash cash. Over the last few years, however, that tradition has all but ended. The implementation of the Swiss Tax Administrative Assistance Act (TAAA) may be one of the final nails in the coffin. Implemented on August 1st, TAAA makes it much easier for foreign governments to obtain information from Swiss banks. That includes the IRS.
Switzerland has agreed to the U.S. FATCA legislation on foreign account reporting but implementing that law and navigating around the vestiges of Switzerland’s bank secrecy laws has been tough. Those secrecy laws have also given false hope to thousands of Americans who still think they won’t get caught with unreported foreign accounts.
They are wrong.
FATCA requires banks worldwide to begin looking through their account records and identifying accounts with ties to the United States. Swiss banks are caught in the middle, however. If they cooperate, they run afoul of Swiss secrecy laws. If they don’t cooperate, they face criminal prosecution by the U.S. Justice Department.
So how does TAAA fit into the ever-changing foreign reporting landscape? TAAA makes it easier for banks to provide information to tax agency requests.
To qualify under TAAA, the request must demonstrate that information sought has “foreseeable relevance” to a criminal investigation. The law still doesn’t allow blanket fishing expeditions nor will it allow banks to respond if the request is based on stolen information. (See yesterday’s post about the new phenomena of bank employees becoming whistleblowers or selling confidential data not to identity thieves and criminals but to tax agencies.)
The law also allows banks to avoid telling customers in certain cases when governments seek information. Sometimes account holders simply close their accounts and move money to a different jurisdiction when they get wind of an investigation.
FATCA came into full swing on July 1st. Switzerland’s Tax Administrative Assistance Act was implemented 1 month later. The days of being able to hide money from the IRS are limited. Unfortunately, most clients we assist aren’t trying to hide money from anyone. They are dual nationals, Americans living overseas, green card holders and foreign born Americans. Many of these folks simply don’t understand their reporting obligations.
If you have an unreported Swiss bank account or other offshore financial account, speak to a qualified tax lawyer, CPA or expat tax service. The penalties for noncompliance are huge and time is limited.
Need more information? Contact an experienced FBAR lawyer at Mahany & Ertl today. Initial consultations are free and confidential. For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464.