After more than 100 years of creating “secret offshore accounts” held covertly in the names of “sham entities and foundations”, on 5/19/14, Switzerland’s 2d biggest bank, Credit Suisse (“CS”) plead guilty to tax evasion (one count of conspiracy to commit tax evasion). CS agreed to pay $2.6B in federal and New York state penalties, and hire an independent monitor for up to 2 years.
For many decades, CS has helped wealthy U.S. taxpayers hide their assets (and earnings) through Swiss Bank accounts, protected by Switzerland’s strict “secrecy” laws. At the time of the 2014 U.S. Senate investigation it was estimated that CS held accounts for up to 22,000 U.S. taxpayers which held up to $12B in assets.
The CS/U.S. Department of Justice settlement did not require CS to identify U.S. taxpayers, unlike the 2009 UBS settlement (which disclosed nearly 5000 US taxpayers).
One reason for the non-disclosure of U.S. taxpayers may be that as of 7/1/14 FATCA takes effect which requires the government of Switzerland (who is a party to one of sixty Inter-Government Agreements “IGAs” signed with the U.S. Government) to have Swiss banks disclose to the Swiss Government the names and identities of all U.S. taxpayers with Swiss Bank Accounts, who will then forward this taxpayer information to the U.S. government (and will reciprocally receive U.S. Government information on Swiss taxpayers from the U.S. banks).
For those U.S. taxpayers in this precarious position, Swiss (and other) banks have been sending letters advising them to confirm their U.S. tax filings which disclose their off-shore accounts (since at least 2008), or have their accounts closed and the IRS notified accordingly with the “suggestion” that these U.S. taxpayers consider entering the IRS/Offshore Voluntary Disclosure Program (2012 forward).
The IRS/OVDP is purported to give U.S. taxpayers a “fresh start” by payment of taxes and penalties and no subsequent criminal prosecution. U.S. taxpayers who enter the IRS/OVDP waive their constitutional rights (i.e. 5th amendment right against self-incrimination, 4th amendment right against unreasonable searches and seizures, and 8th amendment rights against excessive fines). They also waive their 6 year statute of limitation defenses (and must provide tax records for the prior 8 tax years), and present evidence without either transactional or use immunity which evidence may be used against them if they are not accepted in the IRS/OVDP, later withdraw from the OVDP, or are disqualified by the IRS.
As in the case of Beanie Babies founder, billionaire Ty Warner, the evidence he presented was used against him when the IRS declined to accept him in the OVDP (since they already had his name from UBS) and he ultimately paid a $67.5m fine (on original taxes due of $5.6m), plead guilty to tax evasion and received probation from a Chicago Federal District Court Judge, which sentence the U.S./DOJ is appealing since they requested he be jailed.
If you or your clients face this predicament, please contact me at email@example.com for a free, initial consultation on how resolve these outstanding tax matters without the necessity of entering the IRS/OVDP. Please see my website, books and articles, to review my numerous publications on these tax issues.