Friday, April 3, 2015

Foreign Bank Accounts Penalties

On March 30, 2015, the Department of Justice (the "DOJ") publicized a settlement under The Swiss Bank Program, potentially exposing thousands of U.S. taxpayers to a 50 percent penalty for failure to report their offshore bank accounts. The Swiss Bank Program seeks to resolve the potential criminal liability of various Swiss banks. The voluntary program offers the banks a non-prosecution agreement in exchange for the payment of a hefty fine contingent upon their cooperation in disclosing the financial information of U.S. persons. BSI S.A of Switzerland entered into such a NPA and agreed to pay $211 million to the Department. It will provide the Department with financial information on more than 3,000 U.S.-related bank accounts, including accounts where the money was transferred to another country. The DOJ intends to use this information to prosecute individual taxpayers. However, under the terms of the 2014 Offshore Voluntary Disclosure Program (OVDP), U.S. taxpayers may avoid harsher sanctions by declaring their offshore accounts and paying a penalty equal to 27.5 percent of the highest value of the accounts during the prior 8 year  period. The FAQs published under the OVDP state that a 50 percent offshore penalty applies if a foreign financial institution at which the taxpayer has or had an account has been publicly identified as being under investigation or as cooperating with a government investigation. Thus, BSI, S.A. was added to the list of banks which trigger the 50 percent penalty. The higher penalty applies to the total value of all of the taxpayer's undeclared offshore accounts and not just to the balance of the account at BSI S.A. FAQ 7.5 clearly states that once the 50 percent miscellaneous offshore penalty applies to any of the taxpayer's accounts, it will apply to all of the taxpayer's assets subject to the penalty. Thus, taxpayers with a relatively small BSI S.A. account balance, but with larger unreported account balances at other institutions, will be exposed under the OVDP to a higher penalty on all of their accounts.  U.S. persons with unreported accounts at any of the foreign financial institutions on the following list are subject to the 50 percent penalty:
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 (effective December 19, 2014
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

Other institutions may be added to the list over the next few months.