Latest indictment: Another Swiss Banker falls: On August 2, another former Swiss Banker was indicted in the U.S., charged as an enabler, assisting 9 named wealthy U.S. taxpayers to evade U.S. taxes by hiding assets in a smaller Swiss bank (U.S. v. Lack, 11-cr-60184, U.S. District Court, Southern District of Florida [Fort Lauderdale]).   He helped the evaders funnel money from larger Swiss accounts to escape IRS scrutiny and go off the radar screen.  Lack was said to have been executive director of UBS North America International until 2003 and to have conspired with anther UBS banker Renzo Gadola from 1995 to 2008. Gadola plead guilty to an earlier indictment and cooperated with federal investigators.  In 2009 Lack encouraged clients not to join the IRS Voluntary Disclosure Program it was charged told them that the risk of disclosure was “zero percent.”  In part due to disclosures made by those joining the Voluntary Disclosure Program more than two dozen UBS clients have been charged along with other bankers and advisors.  Look for more of the same as IRS and the DOJ continue to mine and understand the information disclosed in the 2009 Voluntary Disclosure Program and 2011 OVDI.

Another Swiss bank probed:  UBS was the tip of the iceberg and not the road’s end as far asU.S. pressure on Swiss banking.  In July Credit Swiss Group was reported to be the latest big target.  The DOJ has notified the bank that it is a formal target in an expanding criminal tax investigation.  There is talk of a settlement involving a large fine and disclosure of account information.  The latest arm-lock move could pressure the Swiss to move more quickly on entering into a broader agreement with U.S. tax authorities covering all Swiss banks, not just UBS as was the case with the earlier controversial agreement that resolved the UBS indictment.  No doubt, continued review of documents and information obtained from those entering the 2009 Voluntary Disclosure Program and 2011 OVDI will lead to an ever-expanding probe until the Swiss cave in.  Thus, the net on capturing hidden offshore funds continues to tighten. 

OVDI Extension:  Thank you Irene.  IRS has announced that entry into the 2011 OVDI is now available until September 9, 2011.  IRS did not limit the extension to those affected by Hurricane Irene; however, an indication to me that the agency is recognizing it backed itself into a dead-end with the August 31 deadline.  Its posted update of the FAQs 24.1 and 25.1 reiterates that identifying information must be submitted by the extended due date but that a 90 day extension may be requested for submitting the entire 2011 OVDI package. The IRS has also clarified that the extension likewise applies to FAQs 17 and 18, i.e., to those who have reported all income and paid the tax but are filing delinquent Forms 5471, 3520 or FBARs.   

FATCA Implementation:  IRS has extended some implementation dates and issued guidance in two Notices (Notice 2011-34 & Notice 2011-53), modifying and supplementing its preliminary guidance issued in Notice 2010-60 and scheduling the phase in of certain provisions.  The Notices provide some relief phasing in some of the onerous requirements of FATCA including registration of Foreign Financial Institutions, reporting, due diligence and withholding with regard to pre-existing and new accounts (See Notice 2011-53, Appendix A. Implementation of FATCA Requirements and Appendix B, New Due Diligence Rules for Pre-Existing Individual Accounts.).  Yet, at its core there remains much criticism of the extra-territorial reach of FATCA and how implementation of the law conflicts with the laws of foreign jurisdictions that protect privacy.

 BSA – meanwhile back at the ranch:  FBAR reporting by individuals is one arm of the Bank Secrecy Act (BSA).  The other arm of the BSA is directed at banks and involves rules that banks must follow to inhibit money laundering by exercising due diligence, having internal control procedures, and reporting cash transactions and suspicious activities.  On August 22, 2011 FinCEN (Financial Crimes Enforcement Network) and the FDIC jointly announced with the Florida Office of Financial Regulation that local financial institution Ocean Bank agreed to a consent order to pay a civil fine of $10,900,000 for failing to comply with the BSA anti-money laundering program, suspicious activity reporting and currency transaction reporting requirements   The FinCEN Assessment of Civil Penalty states that “28% of the bank’s total customers reside outside of the U.S. in high-risk geographies susceptible to money laundering”  Specifically noted is Venezuela “one of the principal drug-transit countries in the Western Hemisphere….The main sources of money laundering are proceeds generated by drug trafficking organizations and illegal transactions that exploit Venezuela’s currency controls and its various exchange rates.”

© 2011 by Robert S. Steinberg, Esquire

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