This predicament is not an uncommon occurrence.  Many taxpayers may have had a foreign bank or brokerage account and reported the income in their tax returns or earned no income but did not know they had to file an FBAR.  They are often panic-stricken over what they have heard are horrific consequences.  But, there is now light at the end of the tunnel thanks to a new IRS procedure aimed at these taxpayers.

Should these taxpayers with delinquent FBARS enter the OVDP?

Absolutely not.  The Offshore Voluntary Disclosure Program or OVDP is for tax criminals or those who fear imposition of a draconian civil FBAR penalty.  The OVDP is not for those who’ve reported all income from an offshore account but failed to file an FBAR or other foreign information return.

Should they elect the new Streamlined Compliance Procedures?

No, they should not.  The Streamlined Procedures (which are really two processes one for expats and one for U.S. residents) is for those taxpayers who have unreported income and / or unfiled or FBARS, where the non-reporting or failure to file was not willful but due to, “negligence, inadvertence or mistake, or conduct that is the result of a good faith misunderstanding of the requirements of the law.” (Language from Streamlined Process Certification). The Streamlined Process is not for those who’ve reported all income or had no income to report on the account but simply neglected to file an FBAR.

How could the taxpayers have no income on an account?

  • Two examples:
    • A non-interest bearing account such as a checking account maintained for the convenience of paying expenses when visiting the foreign country on as a tourist or on business.
    • A trading account that earns no income or incurs a loss during the year.

Then, what should the taxpayer do?

These taxpayers should follow the Delinquent FBAR Submission Procedures published by IRS on June 18, 2014.

Who may use the Delinquent FBAR Submission Procedures?

A taxpayer who:

  • Did not file an FBAR, when required.
  • Is not currently being civilly examined by IRS and is not currently the target of an IRS criminal investigation.
  • Has not been contacted by IRS about the delinquent FBARS.
  • Does not need to file delinquent or amended tax returns to report and pay additional tax.

How do you file delinquent FBARS under the Delinquent FBAR Submission Procedures?

  • E-file the delinquent FBARS as provided in the FBAR filing instructions using the BSA E-Filing System. You generally cannot paper file the FinCEN Form 114 which replaced the TD 90-22.1 form which had been filed with the Department of the Treasury in Detroit.
  • On the first page of the E-filing input screens there is a drop down menu where the filer must indicate the reason for filing late.  The most common reason for those who have reported all income will be, “Did not know I had to file,” but there are other selections including “Other,” for which an explanation must be provided in limited space.
  • If for some reason you are unable to file electronically, you may contact FinCEN’s Regulatory Helpline at 1-800-949-2732 or 1-703-905-3975.

Will I be penalized for filing late?

No. The IRS in its announcement of the Delinquent FBAR Submission Procedures states:

“The IRS will not impose a penalty for failure to file delinquent FBARS if you properly reported on your U.S. tax return, and paid all tax on, the income from foreign financial accounts reported on the delinquent FBARS and you have not been previously contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARS are submitted?”

Will my income tax returns or FBARS be audited?

The IRS announcement regarding Delinquent FBAR Submission Procedures states:

“FBARs will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.”

While the announcement does not mention income tax returns, presumable the same no-automatic-audit rule will apply.  If an audit later reveals that income was not reported on the account, the taxpayer will face potentially severe FBAR and income tax civil and criminal sanctions.

How many years of delinquent FBARS must I file?

File delinquent FBARS for the years open under the Statute of Limitations for assessing FBAR civil penalties.  Normally that will be six years because the Statute of Limitations is six years from the due of the delinquent FBAR, (June 30).  Unlike the Statute of Limitations on income tax assessments, the FBAR Statute begins to run even if no FBAR was filed.  Thus, a 2007 FBAR, due June 30, 2008 would not be required to be filed now because the Statute of Limitations expired on June 30, 2014.  Assuming the 2013 FBAR was timely filed, one would file for the years 2008 through 2012.

Can my CPA prepare and e-file the FBAR for me?

In most cases yes, if it is clear that all income earned on the account was reported. Caveat: There is no di minimis rule; even nominal unreported income will disqualify a taxpayer from using the Delinquent FBAR Submission Procedures and relegate him to employing the OVDP or Streamlined Offshore Compliance Procedures.

Unless it is clear that no income went unreported, taxpayers should probably first consult with an experienced OVDP tax attorney about how to proceed. A CPA has no communications privilege as does an attorney and may be told incriminating admissions about which he can for compelled to testify.


© 2014 by Robert S. Steinberg, Esquire – CPA All rights reserved. www.steinbergtaxlaw.com


Posted in 214 OVDP, FBARS, NEW OVDP, OFFSHORE BANK ACCOUNTS, STATUTE OF LIMITATIONS, TAX | Tagged , , , , , , | Leave a comment


An article in the Wall Street Journal on July 19, 2014 by John Letzing (“Taxpayers Get Incentives to Report: Swiss Banks Aim to Entice Americans to Disclose Accounts to IRS by Helping Cover Costs, Penalties”), reveals what many professionals have known for a while.  Some Swiss Banks are pressuring and offering inducements for clients to enter the IRS Offshore Voluntary Disclosure Program and agree to waive Swiss Bank Secrecy laws that the banks can disclose their accounts.

Why are the Swiss banks so eager to have their American customers enter the OVDP that they would offer financial incentives?

Answer: Because, it serves the bank’s interests.  Over 100 smaller Swiss banks have entered the Swiss Bank Settlement Program offered by the Department of Justice and sanctioned by the Swiss government.  These so-called Category 2 banks not presently under investigation will pay a penalty under negotiated non-prosecution agreements (NPAs).  The banks must encourage clients to enter the OVDP and have until mid-September to offer proof to the DOJ they they’ve met that condition.  In addition, hidden funds voluntarily disclosed by such clients can reduce the penalty the bank must pay under the NPA.  Beyond that reason, banks participating in the program are barred by Swiss law from turning over to DOJ client identities.  Thus, the banks want clients to waive the bank secrecy law prohibition and permit turning over names.

What are some banks offering? 

Answer: The incentives vary from bank to bank and can be modest to substantial and are said to have included agreements to pay:

  • A modest flat sum such as $5,000.
  • A modest share of expenses such as in the case of Zuger Kantonalbank, the cost of the first visit to a tax specialist in connection with entering the OVDP.
  • A share of legal and accounting fees which can be substantial, and,
  • In some cases, a share of the Offshore Penalty imposed under the OVDP.

What does it all mean?

Swiss banks offering inducements are sending letters to clients that warning that if the client refuses to voluntarily disclose, the U.S. tax authorities may obtain their identity through other means such as by analyzing the general account data that will be provided to the DOJ under the Swiss Bank Settlement Program or by making treaty requests for assistance in identifying clients who have not come forward.

In this regard, the Swiss banks are correct.  It is no longer a matter of if a client’s identify will be uncovered but when.  The rocks under which to hide are becoming few and the search for those still hiding becoming more intense and focused.

RSS Comments:

  • By all means seek financial assistance from the bank with these caveats:
    • The financial inducement could be taxable income itself reportable.
    • The DOJ is considering whether these arrangements are objectionable. Why would they be?  I’ll speculate on two possibilities:
      •  Does the payment of compensation taint whether a voluntary disclosure has been made?
      • Should a bank’s penalty under the Swiss Bank Settlement Program be reduced when it has paid compensation to obtain the disclosure?
    • .  Certainly, any inducements should be disclosed in the OVDP submission.
  • Whether or not incentives are offered by your bank, the time for hiding is over.

RSS Suggestion:

If you are still out in the cold with an unreported Swiss or other foreign financial account, you should have acted sooner; but, the time for helpful action is growing perilously late.  So, a word to the wise: Contact an experience OVDP tax lawyer to discuss how you may come into compliance with the least risk of criminal sanctions and the lowest possible financial cost.   Every case is distinct.  There are no generalities that can be applied to how to go about this.  There are, however, alternatives to the OVDP that may be available to some taxpayers.

© 2014 by Robert S. Steinberg, Esquire All rights reserved

Posted in 2012 OVDP, 214 OVDP, FBARS, NEW OVDP, OFFSHORE BANK ACCOUNTS, TAX, TAX CRIMES, VOLUNTARY DISCLOSURE | Tagged , , , , , , , , , , , , | Leave a comment


John J. Scroggin published an interesting and entertaining survey of tax complexity in the Wealth Strategies Journal (Tax Complexity, History, and Humor, July 8, 2014).

The article begins with a quote from Judge Learned Hand:

 “In my own case the words of such an act as the Income Tax… merely dance before my eyes in a meaningless procession: cross-reference to cross-reference, exception upon exception—couched in abstract terms that offer [me] no handle to seize hold of [and that] leave in my mind only a confused sense of some vitally important, but successfully concealed, purport, which it is my duty to extract, but which is within my power, if at all, only after the most inordinate expenditure of time. I know that these monsters are the result of fabulous industry and ingenuity, plugging up this hole and casting out that net, against all possible evasion; yet at times I cannot help wondering whether to the reader they have any significance save that the words are strung together with syntactical correctness.”

Some key points from the article:

  • Even seasoned return preparers are flummoxed by the tax law. Scroggin cites studies in which the same tax information was provided to many different return preparers with the result that no none came up with the same amount of tax due or refund on the return.
  • Politicians call for tax simplification but haven’t delivered on the promise.
  • Complexity makes tax filing much more burdensome and expensive and impedes voluntary compliance.
  • Complexity acts as a drag on the economy.
  • The IRS finds it increasingly difficult to administer the tax laws as a result of growing complexity and diminished funding.
  • Factors adding to complexity include:
    • Girth of the tax code now estimated to contain 4 million words.
    • Sun-setting tax laws that politicians like because they disguise the long term cost of the tax expenditure.
    • Constant changes in the tax code.
    • Incomprehensibility of many provisions of the tax code.
    • Too many conditions that block purported tax benefits
    • Many different phase – out provisions with many different phase out schedules.
    • Too many exceptions and limitations.
    • Too many penalties that often apply to unintentional mistakes.

Scroggin quotes Alfred E. Neuman who said” Today, it takes more brains and effort to make out the income-tax form than it does to make the income.”

Scroggin offers some ideas as to why the tax code is so complex which include:

  • Special interest lobbyists obtain lucrative special tax breaks for clients.
  • Social engineering through the tax code or using the code to achieve non-tax social goals.

Scroggin admonishes tax professionals never to rely on memory when giving a tax answer. The code is simply too complex these days, he says.  Instead read the code sections and run the numbers.


Does this tax complexity impact decision making in the Offshore Voluntary Disclosure area?  The answer, of course, it does.  Like everything the IRS does, it has turned the decision whether to make a Voluntary Disclosure into a deceptively simple but excruciatingly difficult analytical problem.

There is no one solution for a client who has an unreported offshore bank account.  There are a number of alternative routes one may take to come into compliance:

  • OVDP
  • OVDP and Opt-out
  • Streamlined Process for taxpayers residing outside of the U.S.
  • Streamlined Process for taxpayers residing in the U.S.
  • Transitional Rules for those who’ve mailed their OVDP Letter before July 1, 2014.
  • Quiet Disclosure.
  • Filing forward.
  • Do nothing is Statutes of Limitations have run.
  • Traditional Voluntary Disclosure for those with domestic unreported income.
  • Optional compliance procedures for those with unfiled FBARS but no unreported income.
  • Optional Compliance Procedures for those with unfiled information returns but no unreported income.

Selecting a course to a safe harbor is a difficult decision-making process.  No two taxpayers are in the same boat and no one course of action will fit every case.  The facts and circumstances surrounding the establishment of the account, its maintenance and closure, if closed, must be determined and evaluated.  Only then can a sound decision be made how to proceed.  Making the wrong choice can have disastrous consequences including jail time and imposition of draconian penalties that amount to seizure of your property.  Thus, the decision process should be taken very seriously and conducted with the assistance of an experience OVDP tax lawyer.

Robert S. Steinberg, Esquire





Posted in 214 OVDP, FBARS, NEW OVDP, OFFSHORE BANK ACCOUNTS, TAX, VOLUNTARY DISCLOSURE | Tagged , , , , , , , , , , , , | Leave a comment



Revised FAQ 7.2 provides:

 What if the government is investigating the foreign financial institution where I hold my account or another facilitator who assisted in establishing or maintaining my offshore arrangement?

Beginning on August 4, 2014, any taxpayer who has an undisclosed foreign financial account will be subject to a 50-percent miscellaneous offshore penalty if, at the time of submitting the preclearance letter to IRS Criminal Investigation:  an event has already occurred that constitutes a public disclosure that either

(a) the foreign financial institution where the account is held, or another facilitator who assisted in establishing or maintaining the taxpayer’s offshore arrangement, is or has been under investigation by the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person;

(b) the foreign financial institution or other facilitator is cooperating with the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person or (c) the foreign financial institution or other facilitator has been identified in a court- approved issuance of a summons seeking information about U.S. taxpayers who may hold financial accounts (a “John Doe summons”) at the foreign financial institution or have accounts established or maintained by the facilitator.

Examples of a public disclosure include, without limitation:  a public filing in a judicial proceeding by any party or judicial officer; or public disclosure by the Department of Justice regarding a Deferred Prosecution Agreement or Non-Prosecution Agreement with a financial institution or other facilitator.

  A list of foreign financial institutions or facilitators meeting this criteria is available (see below).

Once the 50-percent miscellaneous offshore penalty applies to any of the taxpayer’s accounts or assets in accordance with the terms set forth in the paragraph above, the 50-percent miscellaneous offshore penalty will apply to all of the taxpayer’s assets subject to the penalty (see FAQ 35), including accounts held at another institution or established through another facilitator for which there have been no events constituting public disclosures of (a) or (b) above.

Foreign Financial Institutions or Facilitators (as of 6/20/14)

  1. UBS AG
  2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
  3. Wegelin & Co.
  4. Liechtensteinische Landesbank AG
  5. Zurcher Kantonalbank
  6. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
  7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
  8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
  9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates


  • Obvious as the nose on one’s face is the fact that taxpayers with accounts at the above listed banks had better get into the OVDP or take action to come into compliance before August 4, 2014.
  • Also obvious is that fact that other banks are presently in the IRS’s headlights and may be added to the list at any time. So, taxpayers with accounts at non-listed accounts should take action and not be lulled into the belief that they are home free.
  • While those with accounts at the above listed banks who come in from the cold will face a 50% penalty, that is still much less than the maximum penalty of 300% of the account value that could apply and less than the penalties that IRS has asserted in some recent cases, one most notably in which the penalty assessed exceeded the account value.

© 2014 by Robert S. Steinberg, Esquire All rights reserved


Posted in Uncategorized | Leave a comment


“Beware of false knowledge; it is more dangerous than ignorance.”

- George Bernard Shaw

Shaw’s admonition is applicable to the recently announced Streamlined Process and Transitional as alternatives for resolving offshore noncompliance exposure of U.S. citizens and permanent residents who reside outside of the U.S.  Deciding how to proceed in offshore cases depends entirely on the specific facts of each taxpayer and requires both knowledge of the law and sound judgment in applying it.  Given that, one can still state some obvious and general advantages and disadvantages of these alternatives to the OVDP as related to U.S Citizens or permanent residents living outside the United States.

Streamlined Procedures for U.S. citizens or residents living outside the U.S.

  • Who can utilize?
    • Must be U.S. Citizen, Green Card holder or estate of such individual who in any one or more of the most recent three years for which the U.S. tax return due date has passed (including extensions),did not have a U.S. abode and was physically present outside the U..S. for at least 330 full days.
      • Not disqualified if temporarily present in U.S. or maintain a dwelling in the U.S.
      • Rules under Section 911 dealing with the Foreign Earned Income Exclusion will apply regarding questions of whether a dwelling is an abode that disqualifies the taxpayer from the Streamlined Process (See IRS Publication 54 for a discussion).
    • Individuals who are not U.S. Citizens or Green Card holder may have had returns and / or FBARS due if they had met the Substantial Presence Test for tax residency in any year.  Such individuals or their estates will qualify if in one or more years of the most recent three year period for which the tax filing due date has passed (including extensions), such individual did not meet the substantial presence test of IRC Section 7701(b)(3) (See IRS Publication 519) for a discussion of the substantial presence test).
    • Must not be currently participating in the OVDP
      • Submitting names for clearance or even receiving clearance letter is not participation.
      • One is participating upon having mailed the OVDP Letter and required attachments and until signing of the Form 906, Closing Agreement or, if opted-out, until a letter initiating an examination has been received together with a Notice 609.
    • Like the OVDP, must have unreported income from a foreign financial asset.  There may also be delinquent FBARS.
    • Must not already be under civil examination by IRS or under criminal investigation by IRS are ineligible
    • Taxpayers who are in the OVDP as of July 1, 2014 may qualify for special transitional rules that allow them to elect the Streamlined Process but with certain modifications.
    • Taxpayers who wish to participate in the Streamlined Process will have to obtain a Taxpayer Identification Number (TIN), if they do not already have a Social Security Number or TIN.
  • Advantages of the 2014 Streamline Process over the 2012 Process for expats.
    • There is no vague compliance risk determination by IRS that could exclude taxpayers from the program.
    • There is no top limit on the amount of tax liability as under the 2012 process which excluded taxpayers with a liability of greater than $1,500, or, some unstated amount.
    • There is no questionnaire to complete.
    • Delinquent and amended returns may be filed unlike the 2012 process which excluded a taxpayer who had filed even a single tax return during the three-year period.
  • Disadvantages of the 2014 Streamlined Process compared to the 2012 process:
    • The major disadvantage as discussed below is the requirement to certify under penalties of perjury that the failure to file or report income was due to non-willful conduct.
    • No criminal protection as in OVDP bit will not likely be a major problem for most expats who have little criminal exposure.
  • Advantages of Streamlined Process over the OVDP:
    • Three year income tax filing period in lieu of 8 year OVDP period.
    • Six year FBAR filing period in lieu of the 8 year OVDP period.
    • In lieu of the OVDP penalty of 27.5%, no offshore penalty will apply on account of the failure to have filed timely FBARS.
    • Lower tax and interest due to fewer returns amended.
    • Lower legal and accounting fees due to less work required.
    • No failure to file, failure to pay or 20% accuracy related penalty on the income tax reported in the disclosure unless an examination shows fraud or willfulness.
    • No automatic audit – rather return processed like any other return and selected for audit  under normal IRS procedures ( but see disadvantages below)
  • Disadvantages:
    • Must certify under penalties of perjury (“Certification of U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures”)  that:
      •  “My failure to report all income, pay all tax, and submit all required information returns, including FBARS, was due to non-willful conduct.  I understand that non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of good faith misunderstanding of the requirements of the law.’
      • “I recognize if the Internal Revenue Service receives or discovers evidence of willfulness, fraud, or criminal conduct, it may open an examination or investigation that could led to civil fraud penalties, FBAR penalties, information return penalties, or even referral to Criminal Investigation.”
      • IRS has stated that submissions under the Streamlined Process may be subject to verification procedures in that the accuracy and completeness of submissions may be checked against information received from banks, financial advisors and other sources. Therefore, “Taxpayers who are concerned that their failure to report income, pay tax and submit required information returns was due to willful conduct and who therefore seek assurances that they will not be subject to criminal liability and/ or substantial monetary penalties should consider participating in the OVDP and should consult with their professional tax or legal advisors.”
      • Willfulness may less of a factor for expats living in high-tax jurisdictions or who did not know they had a U.S. tax filing obligation.
      • My worry: clients often have a fuzzy, or worse inaccurate recollection of details pertaining to opening their account or accounts, what was discussed and what was written in emails or other communications.  IRS or DOJ may obtain information from banks that differs from what the client remembers.
      • Another worry: the willful versus non-willful characterization is a partly subjective analysis that depends to a large extent on the “eyes of the beholder.”  Thus, IRS may view as willful that which the taxpayer and even the best counsel may have perceived as non-willful.
      • Certification is a confession or at least an admission of all of the facts regarding opening and operation of the offshore account.
    • Not available for delinquent returns.
  • Some general considerations:
    • Ends of the bell Curse are easy:
      • Those with facts at the non-willful extreme should normally not enter the OVDP but either –
        • Enter the Streamlined Process.
        • File amended returns with a reasonable cause and non-willful explanation.
        • Use the new option for filing delinquent FBARS if all income has been reported but FBARS not filed (Replaces old FAQ 17).
        • Use the new option for filing delinquent information returns such as Forms 3520 or 5471 if all income was reported but information returns not filed (replaces old FAQ 18)..
      • Those with facts clearly indicating willfulness, are probably tax criminals and should normally enter the OVDP.
    • Those in the middle of the Bell Curve have a difficult decision.
      • In most instances, safer to go OVDP and deal with the 8 years filings.
        • The income tax owed and 20% accuracy penalty are often modest and not game changers.
        • Opting-out:
          • If no notice of exam received can still enter the Streamlined Process but then must deal with Certification.
          • Or, can just opt-out and face audit for all open years, subject to all penalties and mitigation of the FBAR penalty under the Internal Revenue Manual Guidelines, if IRS determines the omissions or non-filing to be willful.
    • Those participating in the OVDP (see above for what is participation) on before July 1, 2014 may consider the Transitional Rules, with advantages and disadvantages discussed above for Streamlined Process and considering these additional for and against factors:
      • For: opportunity to keep the OVDP criminal protection and benefit from the Streamlined Process elimination of the FBAR penalty.
      • For: Opt-out from OVDP not required under Transitional Rules but it appears that you may be able to opt-out and seek Streamlined Treatment as well outside of the transitional rules.
      • For:  The special OVDP PFIC modified rules still may be elected.
      • Against: OVDP period remains the same (8 years for 2012 OVDP)
      • Against: 20% accuracy related penalty still applies.
      • For and Against:  Form 906, Closing Agreement must be executed.
      • Against: Must submit all documents required by OVDP.
      • Against:  Must sign Non-willful Certification under penalties of perjury (see above for concerns).
      • Against:  IRS must approve and will review each request to determine eligibility and whether certification of non-willfulness is complete and the available information is consistent with the certification.
      • Against:  an IRS Central Review Committee may also review the facts to ascertain if the examiner’s determination and rationale are consistent with other determinations made across the IRS.

      Conclusion:  The addition of Streamlined Procedures and the Transition Rules to the offshore pot offers some alternative routes for resolving offshore non-filing problems. Although many who live outside the U.S. will have facts clearly indicating non-willfulness, others will find themselves having grayer factual situations.  In either case the Streamlined Process offers additional opportunities and complexities requiring careful legal and factual analysis which should be undertaken by experienced tax counsel.

      Copyright 2014 by Robert S. Steinberg, Esquire
      All rights reserved




On July 8, 21014 Edward Cronin, Associate Chief Counsel (Criminal Tax) and Don Fort, CID Director of Field Operations participated in an ABA Tax Section Webinar, “Current IRS Criminal Investigation Enforcement Priorities and Issues.”  Some of the highlights from the written materials and speaker comments is summarized below.


One of CID’s primary missions still is, “To identify taxpayers who commit tax evasion by using offshore accounts and abusive schemes.”  This mission includes pursuing FBAR non-filers.  During IRS Fiscal Year 2013, CI initialed Indictments and Convictions were as follows:

  • 184 Indictments (or Informations).
  • 149 Convictions.
  • Conviction rate:  85.98%
  • Sentenced: 125
  • Average months to serve: 51


A tremendous amount of fresh data and information is now flowing into CID, including data, information and leads:

  • From Whistleblowers
  • Obtained through the Offshore Voluntary Disclosure Programs.
    • To date, there have been over 40,000 participants in the various OVDPs.
    • As of the end of 6/30/12, there were 4,699 participants in the 2012 version of the OVDP.
  • Obtained by Special Agent Attaches now in 16 countries including Beijing, Bogata’, London, Mexico City, Sydney to name some.
  • Under Tax Information Exchange Agreements signed under the OECD scheme.
  • From the 106 Swiss Banks seeking Non-Prosecution Agreements.
  • As a result of the Credit Swiss guilty plea.
  • Beginning July 1, from the 77,000 banks that have agreed to comply with FATCA.


  • Promoters or enablers who have assisted U.S. taxpayers in hiding offshore financial assets by utilizing various artificial structures such as Foundations.
  • Banks who promoted or willingly participated in offshore evasion schemes.
  • U.S. taxpayers who knowingly used such programs and failed to disclose their offshore financial assets.


  • With the wealth of new information and data that CID will be receiving, it is likely that the number of indictments will increase sharply despite the strains budget cuts have imposed on IRS resources.
  • Many taxpayers have been spurred on to seek counsel about coming into compliance by the IRS announcement of its new Streamlined Process for U.S. Taxpayers.  Yet, many of these newly motivated taxpayers will not qualify for the Streamlined Process because their actions in setting up and maintaining offshore accounts will clearly show indicia of willfulness.
  • Thus, decisions about how to safely come into compliance will continue to be a vexing and delicate balancing act with the OVDP protection from criminal exposure weight on one scale-pan and other alternatives to lower the FBAR civil penalty below 27.5% on the other.  There are no generalities here.  Only through a careful analysis of a taxpayer’s particular situation by capable legal tax-counsel can one arrive at the safest solution in a particular case.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved



The DOJ Press Release reproduced below in its entirety should be very scary to those still out in the cold with unreported foreign financial accounts.  We know that foreign banks are taking steps to minimize their risk of criminal prosecution by agreeing to give up names of U.S. customers; we also know that indicted advisors and bankers seeking sentence leniency have been cutting plea deals that include cooperation with the DOJ. But, now comes Swisspartners who has taken the “save-your-own-skin” strategy a step further.  Before any indictment or even investigation Swisspartners proactively came forward on its own to mitigate exposure to criminal penalties by among other actions giving up the names of clients who had placed their trust with the firm.  Those who are still waiting to come into compliance should carefully read this DOJ Press Release and take note of the threat in the betrayal by Swisspartners; and, of the explicit warning of the DOJ that whether one who is still hiding money will be caught  is no longer “a matter of if, it’s a matter of when.”


Swiss Asset Management Firm and Related Companies Agree to Resolve Criminal Tax Investigation

The Swisspartners Group Is Paying $4.4 Million in Forfeiture and Restitution

James M. Cole, the Deputy Attorney General of the Department of Justice, Kathryn Keneally, the Assistant Attorney General for the Tax Division of the Department of Justice, Preet Bharara, the United States Attorney for the Southern District of New York, and Richard Weber, the Chief of the Internal Revenue Service, Criminal Investigation (IRS-CI), announced today that swisspartners Investment Network AG, a Swiss-based asset management firm, and three of its wholly-owned subsidiaries (collectively, the Swisspartners Group), entered into a non-prosecution agreement (NPA) with the U.S. Attorney’s Office for the Southern District of New York and agreed to pay $4.4 million to the United States.   The NPA was entered into based on, among other things, the Swisspartners Group’s remedial measures, voluntary self-reporting and extraordinary cooperation, including its voluntary production of approximately 110 client files for non-compliant U.S.-taxpayer clients, and provides that the Swisspartners Group will not be criminally prosecuted for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from in or about 2001 through in or about 2011.   The NPA requires the Swisspartners Group to forfeit $3.5 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $900,000 in restitution to the IRS, representing the approximate amount of unpaid taxes arising from the tax evasion by the Swisspartners Group’s U.S. taxpayer-clients.   The NPA applies only to the four specific entities that are party to it and does not apply to any other subsidiaries of swisspartners Investment Network AG or any individuals.

“The extraordinary cooperation of Swisspartners has enabled us to identify U.S. tax cheats who have hidden behind phony offshore trusts and foundations,” said Deputy Attorney General Cole.   “In this and other cases around the world, we will continue to provide substantial credit for prompt and full cooperation.” “As today’s announcement shows, we receive information about U.S. taxpayers with undisclosed accounts from many sources, some of which are not public,” said Assistant Attorney General Keneally.   “For many accountholders, the time to come forward voluntarily to avoid criminal prosecution has run out.” “This office will continue to work aggressively to hold accountable not only those U.S. taxpayers who evade their tax obligations by hiding money overseas, but also those abroad who make such tax evasion possible,” said U.S. Attorney Bharara.   “For its wrongdoing in assisting U.S. taxpayers to open and maintain undeclared accounts overseas, the Swisspartners Group is being made to pay $4.4 million in forfeiture and restitution.   Swisspartners avoided criminal charges as a direct result of its decision to self-report its misconduct at a time when it was not even under investigation and its extraordinary cooperation, including its decision to turn over voluntarily the files and identities of U.S. taxpayer clients it helped hide money from the IRS.   The case serves as a clear example of the benefits that can be obtained from early and complete cooperation with federal law enforcement.”

“I am very pleased that we have successfully concluded negotiations with the Swisspartners Group,” said IRS-CI Chief Weber.   “In making amends, the Swisspartners Group has turned over 110 account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas.   This agreement marks yet another significant step forward in combating offshore tax evasion.   Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted.   It’s not a matter of ‘if,’ it’s a matter of ‘when.” The NPA was entered into between the U.S. Attorney’s Office, on the one hand, and swisspartners Investment Network AG and the following three wholly-owned subsidiaries on the other: swisspartners Wealth Management AG, a   Zurich-based company that establishes and manages entities such as foundations and trusts; swisspartners Insurance Company SPC Ltd., a Cayman Islands-based life insurance carrier that offers life insurance and annuity products; and swisspartners Versicherung AG, a Liechtenstein-based insurance carrier that offers a variety of insurance and annuity products.

As part of the NPA, the Swisspartners Group admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct.   Specifically, the Swisspartners Group admitted that it knew certain U.S. taxpayers were maintaining undeclared foreign bank accounts with the assistance of the Swisspartners Group in order to evade their U.S. tax obligations, in violation of U.S. law.   The Swisspartners Group acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by, among other things, creating sham foundations and other sham entities that served as the nominal account holders; placing accounts or insurance policies in the names of non-U.S. nationals; facilitating the transportation of large amounts of cash into the United States on behalf of U.S. taxpayer-clients; and arranging for the bulk deposit of cash at Swiss depository financial institutions on behalf of U.S. taxpayer-clients. As part of the NPA, the Swisspartners Group has agreed to forfeit $3.5 million to the United States, representing certain fees it obtained in exchange for services that it provided to U.S. taxpayers with undeclared foreign bank accounts from in or about 2001 through in or about 2011.   In connection with this forfeiture, the Swisspartners Group has agreed not to contest a civil forfeiture action filed by the United States.   That action was filed on May 9, 2014, in the U.S. District Court for the Southern District of New York and assigned to U.S. District Judge Gregory H. Woods. The department entered into the NPA based on factors including:

· the Swisspartners Group’s voluntary implementation of various remedial measures beginning in or about May 2008; · the Swisspartners Group’s voluntary self-reporting of its criminal conduct at a time when it was neither a subject nor target of any investigation by the U.S. Department of Justice; · the Swisspartners Group’s voluntary and extraordinary cooperation, including its voluntary production of account files that include the identities of U.S. taxpayer-clients; · the Swisspartners Group’s willingness to continue to cooperate to the extent permitted by applicable law; and ·  the Swisspartners Group’s representation, based on an investigation by outside counsel, the results of which have been shared with the U.S. Attorney’s Office and the Tax Division, that the misconduct under investigation did not, and does not, extend beyond that described in the Statement of Facts. The NPA requires the Swisspartners Group to continue to cooperate with the United States for at least three years from the date of the agreement.   In the event that the Swisspartners Group violates the NPA, the U.S. Attorney’s Office may prosecute the Swisspartners Group.

RSS Comments:

  • The time for those with hidden offshore financial accounts to dawdle has passed.  There is, however, still opportunity, even for those with accounts at the listed banks under DOJ investigation, to mitigate the damages from past non-compliance or willful evasion of tax.  Those with listed banks, however, must act before August 4 to avoid a yet harsher 50% offshore penalty in the OVDP.  The current OVDP offshore penalty is 27.5% of the highest account balance during the OVDP 8-year period.
  • Those with accounts at non-listed banks should not delay.  Inevitably, many other banks will be added to the blacklist with no advance warning.
  • Those who have been assisted by middlemen or advisors of any kind should assume they will be stabbed in the back by those advisors seeking to save their own skin.
  • All still out in the cold, regardless of the particular facts and circumstances, should hasten to contact experienced tax counsel for advice on how to come forward with the greatest protection and least damaging financial consequences.
  • The OVDP offers maximum criminal protection but for the least culpable, other less financially costly alternatives may be applicable.  But decisions about how to proceed are complex, and, thoughtful analysis and sound legal judgment are necessary to avert possible disasters from selecting the wrong course.

© 2014 by Robert S. Steinberg, Esquire
All rights reserved



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