According to a wire report from Reuters, Vadian Bank AG, a small bank located in St. Gallen, Switzerland, is the latest bank to cooperate with the U.S. Department of Justice. In 2013, the U.S. government offered a voluntary disclosure program for Swiss banks that helped Americans hide their assets from the IRS. Earlier this spring, another Swiss bank, BSI, settled with the government.
Vadian is tiny bank with just one office. According to Reuters, Vadian Bank was founded in 1811. It is also known as Ersparnisanstalt der Stadt St. Gallen or St. Gallen Savings Bank.
The Justice Department claims the bank held just two accounts belonging to Americans until 2008. After the IRS and Justice Department cracked down on UBS, however, Vadian capitalized on the flight of accounts from UBS. The number of American accounts quickly mushroomed from 2 to over 70.
Owning an account in Switzerland or having signature authority over a foreign account isn’t illegal as long as the account is properly reported or is not being used to evade taxes.
U.S. law requires taxpayers having control or ownership of foreign financial assets to report those assets annually if the aggregate value exceeds $10,000. Reporting is done on a Report of Foreign Bank and Financial Accounts or FBAR form. Failure to file an FBAR carries huge civil penalties and even a risk of prison.
Vadian probably thought it wouldn’t get caught because it tiny and has no branches in the United States. Foreign banks soon learned, however, that countries across the world are now cooperating with one another. They also learned that the IRS and Department of Justice have a very long reach.
Vadian Bank will pay the United States government $4.25 million and cooperate going forward. The real lessons in this story aren’t for the 70 people with Vadian accounts, however.
Moving money from one bank to another trying to stay one step ahead of the IRS doesn’t work. Sooner or later you will be caught. Worse, the IRS considers moving offshore accounts in response to perceived enforcement risks to be an affirmative act of tax evasion.
There are amnesty and streamlined filing options available to most taxpayers with unfiled FBAR forms and unreported accounts. Many of the amnesty options disappear once a bank decides to cooperate with the IRS or when the IRS issues subpoenas to the banks.
If you have filed to file FBAR forms for more than one year or have unreported foreign bank, precious metal or investment accounts, give us a call. Stop looking over your shoulder and see learn your obligations and options. Most of our services are offered on a flat fee basis and our IRS tax lawyers can help people anywhere in the world.
Mahany & Ertl – America’s FBAR Lawyers