[Updated August 2019 – Important Information for Offshore Tax Evasion whistleblowers below.] As the government dramatically ramps up its efforts to ferret out unreported foreign accounts, reports of Swiss banks settling with the Justice Department become almost everyday news.
When this post was first written, tow more Swiss banks, Societe Generale Private Banking S.A. and Berner Kantonalbank AG, became the newest banks to settle with the United States. Both Societe Generale and Berner Kantonalbank agreed to help the IRS find Americans who moved money to other banks and to assist in efforts to find taxpayers that hid assets from the government.
Today, that is old news. The newest bank as this post is being updated is Swiss bank LLB Verwaltung (more on them below). There have been dozens of offshore banks that have settled with the Justice Department. Their names are no longer important, unless of course you have an account there that was never properly disclosed to Uncle Sam. (If that is the case, depending on the size of the account, we can refer you to a great offshore reporting CPA firm or a criminal lawyer.)
The takeaway from this post is that it is getting increasingly more difficult to hide bank accounts from the government. You can still hide cash in your mattress but even then, good luck if you try to spend it. There are currency reporting requirements to contend with too.
U.S. taxpayers with more than $10,000 in foreign financial holdings must annually report their holdings. Failure to report may be criminal and usually carries huge civil fines that can equal the highest historical balance of the foreign account. Those penalties can be levied even if that account is now liquidated and closed.
The Obama administration ushered in the Foreign Account Tax Compliance Act (FATCA) which requires all foreign banks to cull through their records and report account holders or signatories with ties to the United States. Although FATCA applies worldwide and is now in effect, it hasn’t stopped the Justice Department from targeting specific banks that have helped Americans hide money or move money to other banks in the hopes of avoiding detection.
Several years ago Justice Department recently offered an amnesty to Swiss banks. Those banks that cooperate and pay a fine do not get criminally prosecuted. Switzerland’s oldest private bank, Wegelin, went under after being prosecuted in January of 2013. To avoid a similar fate, most Swiss banks are now cooperating or have signaled an intent to do so.
When this post was first written, Societe Generale and Berner Kantonalbank agreed to pay a combined total of $22.4 million to avoid prosecution.
In announcing the settlement, an IRS spokesperson said, “These two resolutions with Societe Generale Private Banking (Suisse) SA and Berner Kantonalbank AG represent the ongoing commitment by the IRS and the Department of Justice to ensure that U.S. taxpayers report foreign bank accounts and pay taxes on all income earned from those accounts.”
The IRS says that Societe Generale admitted that some of its bankers helped Americans hide their offshore accounts by using false names and putting the accounts in the names of nominee entities based in Panama and the British Virgin Islands.
LLB Verwaltung Settles Charges Over Hidden Foreign Accounts
Today, years after the Swiss bank amnesty program ended, a couple stragglers still think they can beat Uncle Sam. The latest to pay up is LLB Verwaltung. It agreed this month to pay $10.7 for helping Americans hide assets and income from the Internal Revenue Service.
A few years ago, LLB Verwaltung, then called LLB-Switzerland, had 93 U.S. clients who collectively had approximately $200 million in assets in the bank. Justice Department officials say that bank managers worked with a private asset manager to conceal accounts. According to one official,
“The Swiss asset manager provided prospective customers with a sales letter, pitching his ability to conceal a client’s assets and income from taxing authorities through the use of multiple layers of sham offshore entities and nominee directors in countries or regions that the Swiss asset manager thought would resist requests for information and assistance from foreign law enforcement, including law enforcement in the United States.”
Liechtensteinische Landesbank AG (“LLB-Vaduz”), a bank headquartered in Liechtenstein, acquired LLB (Schweiz) AG (“LLB Switzerland”) in Zurich, Switzerland.
In 2011, the U.S. Department of Justice informed LLB-Vaduz that it was a target of a grand jury investigation. The parent bank, LLB-Vaduz, entered into a Non-Prosecution Agreement with the Department of Justice in July 2013. That agreement specifically carved out LLB-Switzerland. The parent bank instead it was closing LLB Switzerland.
It didn’t. Instead it started doing business as LLB Verwaltung. Prosecutors say the bank began working with a private asset manager and using nominee entities in tax haven jurisdictions to help Americans hide their accounts.
Laws Related to Offshore Accounts
As noted above, Americans have an obligation to report offshore bank accounts and certain other financial assets such as brokerage accounts and cash value life insurance.
It’s not just U.S. citizens or those with unreported Swiss accounts that should be worrying. The IRS foreign reporting rules apply to all U.S. citizens, American expats living overseas, green card holders and dual nationals no matter where they live.
Although the Justice Department created an amnesty program aimed at Swiss banks, the IRS and Justice Department have acknowledged looking into banks in Brazil, India, Israel, the Caribbean, and Liechtenstein. An IRS official recently told an offshore fraud group in Miami that Latin American banks are being scrutinized as well.
FATCA requires all banks worldwide to report accounts with ties to the United States. That tie could be someone with signature authority on the account or a U.S. passport or address. Banks that don’t cooperate are subject to punitive withholding requirements and are more likely to come under criminal investigation.
Between FATCA and the government’s aggressive enforcement policies, hiding money offshore has become near impossible and certainly not worth the risk.
Updated List of Cooperating Banks [This list is now dated]:
- UBS AG
- Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
- Wegelin & Co.
- Liechtensteinische Landesbank AG
- Zurcher Kantonalbank
- swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
- CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
- Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
- The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
- The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
- Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates
- Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA
- BSI SA
- Vadian Bank AG
- Finter Bank Zurich AG
- Societe Generale Private Banking (Lugano-Svizzera) SA
- MediBank AG
- LBBW (Schweiz) AG
- Scobag Privatbank AG
- Rothschild Bank AG
- Banca Credinvest SA
- Societe Generale Private Bank
- Berner Kantonalbank
This post was written several years ago. Since then, the number of cooperating banks has grown exponentially. There are very few places to hide money these days and many are not safe.
Since this post has been written, the feds have gone after banks across the world including Liechtenstein, Israel and the Caribbean. So many banks that the above list is woefully outdated. Today it is safe to assume that your bank is cooperating.
The newest frontier in the world of offshore tax evasion is foreign asset managers, offshore insurance and accounts held in nominee names. If you think you can create a company and use sham directors or create a string of offshore shell companies, think again. While it is harder to get caught, the government is also getting smarter. And more and more countries are cooperating with one another.
Having an unreported offshore account isn’t illegal but not reporting the account is. [We no longer handle offshore reporting for individual taxpayers – accountants today can usually always handle the job unless there is a risk of criminal prosecution. If you need someone to help you come into compliance, call us. We know several experienced CPAs well versed in offshore reporting.]
Whistleblowers and Offshore Tax Evasion
Many of the largest offshore tax prosecutions have come to light because of whistleblowers. One former UBS Bank director received a $104 million whistleblower reward.
If you have information about offshore tax evasion, contact us. You may be eligible for an award. We are seeking both banking insiders and those having information about individual high net worth Americans who may be evading taxes. With awards of up to 30% of whatever the IRS collects, the rewards can be quite high.
With awards so high, the days of private account managers or banks like LLB Verwaltung are numbered. If you work for such a bank or manager and are still helping Americans hide money, give us a call. The IRS does a great job of maintaining confidentiality. And you may be entitled to a large cash reward.
To learn more, contact us online, by email or by phone 800.669.7782. All inquiries are protected by the attorney – client privilege and are kept confidential. We also invite you to visit our IRS offshore tax evasion whistleblower page.