The Swiss subsidiary of Deutsche Bank is cooperating with the IRS and Justice Department to disclose accounts belonging to or affiliated with Americans. U.S. law requires taxpayers holding more than $10,000 in offshore financial assets (such as bank accounts) to report those accounts or face huge penalties. Reporting must be done annually and is done on both Schedule B of one’s income tax return and also on an FBAR form (Foreign Bank Account Report).
The Wall Street Journal today reported that Deutsche Bank is cooperating in order to avoid criminal prosecution. The Justice Department believes many Swiss banks actively assist their American clients evade U.S. taxes. The Swiss subsidiaries of Morgan Stanley and Goldman Sachs are also cooperating.
The Journal reports that Deutsche Bank’s Swiss unit has approximately 13,000 clients though few are Americans.
Although the bank will avoid prosecution, it will still be subject to stiff fines. Those fines can be reduced if the bank can get U.S. customers to waive their privacy rights under Swiss law. We believe that customers who refuse to permit disclosure will likely see their accounts closed and later face prosecution in the U.S. Although Swiss privacy laws are in flux, the Swiss government has agreed to comply with FATCA, President Obama’s Foreign Account Tax Compliance Act.
U.S. Department of Justice Offshore Compliance Initiative
Some members of the Swiss Parliament continue to fight the repeal of Swiss bank secrecy laws but ultimately, the IRS is expected to get the names of both present and former holders of Swiss accounts. A customer’s refusal to cooperate with the bank will likely be viewed by prosecutors as an affirmative act of tax evasion.
Deutsche Bank’s cooperation isn’t surprising since it is rumored to have few American clients in its Swiss banking unit and since it is already under intense regulatory scrutiny for its alleged roll in the LIBOR scandal. Earlier this year Credit Suisse admitted to helping Americans evade taxes through unreported offshore accounts. It paid a $2.6 billion fine.
If you have an unreported offshore account, time is running out. It’s not just Deutsche Bank that is cooperating. Banks and financial institutions around the world are cooperating and tens of thousands have already registered with the IRS pursuant to the new FATCA law.
If you are current with FBAR filings there is probably little to fear but make sure that you not only report the account itself on an FBAR but also any income from that account (interest, dividends or capital gains) on your tax return. One or more years delinquent on FBARs? Seek help from a qualified tax lawyer immediately.
Need more information? The FBAR lawyers at Mahany & Ertl concentrate in IRS offshore reporting. FATCA, FBARs, the OVDP and streamlined amnesty programs. Inquiries are kept in strict confidence and protected by the attorney client privilege. Our initial consultations are also without charge or obligation. Need more information? Contact attorney Bethany Canfield at or by telephone at (414) 223-0464.