The IRS continues to cast a wider net for offshore tax cheats and continues to make the cost of waiting to come into compliance expensive. Some recent developments illustrate:

Tax storm in the Caribbean:

The IRS had previously served a John Doe Summons with regard CIBC in the Bahamas seeking that bank’s U.S. depositor identities. Now, IRS is focusing on another Caribbean tax paradise. IRS has also served a John Doe Summons on Citibank and BOA correspondent banks for Belize Bank International Limited (BBIL) and Belize Bank Limited (BBL). The IRS wants to obtain the identity of the Belize banks’ U.S. depositors. The John Doe Summons is employed to seek the name of not one particular taxpayer but the names of all taxpayers in a particular group. A judge must approve the summons. The IRS first used this tactic against UBS with regard to its U.S. account holders.

Once publicly disclosed, depositors at the served bank face disclosure and a higher cost to enter the Offshore Voluntary Disclosure Program, assuming they act before their names are turned over. The serving of a John Doe Summons is an act of public disclosure that causes the depositors of the bank summonsed to incur a 50% miscellaneous offshore penalty in the OVDP instead of the usual 27.5% penalty.

Bad Banks list continues to grow:

The list of banks whose depositors are subject to the 50% penalty has now grown to 52 banks and includes:

Foreign Financial Institutions or Facilitators

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
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. 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 (effective 12/22/14)
13. BSI SA (effective 3/30/15)
14. Vadian Bank AG (effective 5/8/15)
15. Finter Bank Zurich AG (effective 5/15/15)
16. Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
17. MediBank AG (effective 5/28/15)
18. LBBW (Schweiz) AG (effective 5/28/15)
19. Scobag Privatbank AG (effective 5/28/15)
20. Rothschild Bank AG (effective 6/3/15)
21. Banca Credinvest SA (effective 6/3/15)
22. Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
23. Berner Kantonalbank AG (effective 6/9/15)
24. Bank Linth LLB AG (effective 6/19/15)
25. Bank Sparhafen Zurich AG (effective 6/19/15)
26. Ersparniskasse Schaffhausen AG (effective 6/26/15)
27. Privatbank Von Graffenried AG (effective 7/2/15)
28. Banque Pasche SA (effective 7/9/15)
29. ARVEST Privatbank AG (effective 7/9/15)
30. Mercantil Bank (Schweiz) AG (effective 7/16/15)
31. Banque Cantonale Neuchateloise (effective 7/16/15)
32. Nidwaldner Kantonalbank (effective 7/16/15)
33. SB Saanen Bank AG (effective 7/23/15)
34. Privatbank Bellerive AG (effective 7/23/15)
35. PKB Privatbank AG (effective 7/30/15)
36. Falcon Private Bank AG (effective 7/30/15)
37. Credito Privato Commerciale in liquidazione SA (effective 7/30/15)
38. Bank EKI Genossenschaft (effective 8/3/15)
39. Privatbank Reichmuth & Co. (effective 8/6/15)
40. Banque Cantonale du Jura SA (effective 8/6/15)
41. Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)
42. bank zweiplus ag (effective 8/20/15)
43. Banca dello Stato del Cantone Ticino (effective 8/20/15)
44. Hypothekarbank Lenzburg AG (effective 8/27/15)
45. Schroder & Co. Bank AG (effective 9/3/15)
46. Valiant Bank AG (effective 9/10/15)
47. Bank La Roche & Co AG (effective 9/15/15)
48. Belize Bank International Limited, Belize Bank Limited, Belize Corporate Services Limited, their predecessors, subsidiaries, and affiliates (effective 9/16/15)
49. Galler Kantonalbank AG (effective 9/17/15)
50. Gutzwiller & Cie, Banquiers (effective 9/17/15)
51. Migros Bank AG (effective 9/25/15)
52. Graubundner Katonalbank (effective 9/25/15)

Action with regard to Australian accounts:

The Australian Taxation Office announced on 9/23/15 that it will become the first country to undertake and execute an automated sharing of taxpayer information with the IRS. It will turn over to IRS some 30,000 financial accounts said to have a value exceeding $5 billion. Australia’s action is a first step in the implementation of the OECD information sharing regime called Common Reporting Standards.

The above announcement is a result of Australia and UK having executed IGA’s (Inter-governmental Agreements regarding FATCA) and becoming the first countries to enter into a Competent Authority Agreement with the USA. The preamble to the Australia-US CAA explains its purpose (The US – UK CAA is essentially the same):

 On April 28, 2014, the Government of the United States of America and the Government of Australia signed an intergovernmental agreement (“IGA”) entitled, “Agreement between the Government of the United States of America and the Government of Australia to Improve International Tax Compliance and to Implement FATCA.” The IGA requires, in particular, the exchange of certain information with respect to U.S. and Australian Reportable Accounts on an automatic basis, pursuant to the provisions of Article 25 of the Convention between the Government of the United States of America and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income (the “Convention”).

Article 3(6) of the IGA provides that the Competent Authorities of the United States and Australia (the “Competent Authorities”) shall enter into an agreement or arrangement under the mutual agreement procedure provided for in Article 24 of the Convention, in order to establish and prescribe the rules and procedures necessary to implement certain provisions in the IGA. Article 24 of the Convention permits the Competent Authorities to also address other matters regarding implementation of the Convention.

Impact of these events:

These two agreements and the others to follow further tighten the net on offshore evaders. As IRS Commissioner John Koskinen stated:

“The signing of these Competent Authority Arrangements marks another significant milestone in the international effort to gain proper reporting of offshore accounts and income. Together in partnership with other tax authorities, we are demonstrating how far we have come in the fight against offshore tax evasion.”

The IRS is widening its web and tightening its noose around offshore evaders. Those still out in the cold should consider coming into compliance through the available channels that include:

• The Offshore Voluntary Disclosure Program generally for those fearing criminal tax charges or egregious FBAR penalties.
• The Streamlined Filing Compliance Procedures for those with non-willful conduct with regard to establishing and operating the offshore accounts.
• Delinquent FBAR Submission Procedures. Generally for delinquent or amended FBARS of those with no unreported income from offshore activities.
• Delinquent International Information Return Procedures: For those with a strong reasonable cause excuse for not having timely or correctly filed the information returns (such as 5471).
• Filing delinquent or amended returns for those with a strong reasonable cause excuse for not having filed or reported with regard to offshore activities. Caveat: Reasonable cause broadly means, the absence of negligence.

The analysis of how to go about coming into compliance should be undertaken with the assistance of a tax attorney experienced in these matters.

Robert S. Steinberg, Esquire
www.steinbergtaxlaw.com