Are there any Swiss banks that haven’t agreed to cooperate with the IRS? Probably not!
The push to find unreported foreign accounts began in 2009 with the deferred prosecution of Swiss banking giant, UBS. Bradley Birkenfeld, a former UBS private banker, blew the whistle on his former employer and promptly earned a $104 million whistleblower award. UBS paid a fine of $780 million and thus began a new era.
Since the UBS case, Credit Suisse has paid $2.6 billion to settle criminal charges of helping wealthy Americans evade taxes. Wegelin, Switzerland’s oldest private bank, also pleaded guilty and soon thereafter closed its doors. Those prosecutions scared the remaining Swiss banks into action. So far 27 Swiss banks have settled with the United States Department of Justice.
The newest settlements come from Geneva-based Banque Pasche SA and Pfaffikon-based Arvest Privatbank AG. Of the two banks, Banque Pasche paid a much higher penalty for its actions. The Justice Department said that bank helped Americans who were trying to move their money from UBS and Credit Suisse ahead of those prosecutions. The bank also helped Americans file false tax returns.
The Justice Department also said that Banque Pasche helped Americans avoid detection by setting up phony entities in Panama or the British Virgin Islands. Arvest Privatbank apparently did the same thing but instead helped taxpayers set up fake trusts and foundations in St. Kitts and Liechtenstein.
Nominee accounts have long been a subterfuge for tax evasion. There use has become so prevalent that the IRS considers the use of a shell or nominee entity to be an affirmative act of tax evasion. Both willful failure to file an FBAR and tax evasion are felonies punishable by 5 years in prison.
Owning a Swiss account or keeping money in a foreign account is legal as long as all reporting requirements are met. Federal law requires taxpayers with more than $10,000 in foreign financial assets to file a yearly FBAR form and declare the account. Short for Report of Foreign Bank and Financial Accounts, an FBAR form must be filed by both the owner of an account and anyone having signature authority.
According to a statement from the Justice Department, “Banque Pasche and Arvest have provided detailed information regarding the ways in which Swiss banks helped U.S. taxpayers conceal foreign accounts and evade their U.S. tax obligations, including through the use of numbered and coded accounts and sham offshore entities. As required under the program, these banks will continue to cooperate as we aggressively pursue those individuals and the professionals who facilitated their criminal conduct.”
We anticipate another 75 Swiss banks will come forward in the coming weeks. The Justice Department and IRS have now set their sights on banks domiciled in other countries including the Bahamas, Caymans, India, Israel, Brazil, Luxembourg.
If you have unfiled FBAR forms that are more then one-year delinquent, contact an experienced IRS tax lawyer immediately. As noted above, failure to file an FBAR may be a felony and usually always carries stiff civil penalties. There are amnesty and streamlined reporting options but those are only available if you contact the IRS first. Once the IRS obtains your name, all bets are off.
For more information, contact attorney Beth Canfield at or by telephone at (414) 223-0464. All inquiries are protected by the attorney – client privilege and kept strictly confidential. Initial consultations are free and FBAR services are available worldwide. Most matters can be handled on a flat fee basis.