Offshore Accounts and Money Laundering

As of today, 44 Swiss Banks have agreed to settle with the US DOJ. Taxpayers with accounts at these banks face a 50% penalty if they enter the IRS OVDP i.e. 50% of the account balance is a penalty paid to the IRS.

1. IRS Offshore Account Penalties Increase, Hunt Continues

The number of Swiss banks that have entered deferred prosecution agreements with the U.S. government keeps growing. The subject is tax evasion involving American account holders. Today, banks everywhere want to know if you are compliant with the IRS. Under FATCA, the entire world is lending the IRS a hand. The IRS keeps updating its list of foreign banks where offshore accounts trigger a 50% (rather than 27.5%) penalty in the IRS’s long-running Offshore Voluntary Disclosure Program (OVDP). This penalty is based on the highest account balance measured over up to eight years.

The IRS recently added Bank EKI Genossenschaft (effective 8/3/15); Privatbank Reichmuth & Co. (effective 8/6/15); Banque Cantonale du Jura SA (effective 8/6/15); Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15); bank zweiplus ag (effective 8/20/15); Banca dello Stato del Cantone Ticino (effective 8/20/15); and Hypothekarbank Lenzburg AG (effective 8/27/15). This higher penalty was created as part of the June 2014 OVDP reforms that created a more lenient deal for the non-willful, and a more stringent OVDP for others.

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In related news, the IRS is now going after advisors who helped clients in setting up offshore accounts.

2. The New Money-Laundering Sting: Come to the U.S., Get Arrested

Lawyer Patrick Poulin says he helped clients set up offshore corporations in the Caribbean. And that’s what he was working on when he flew to Miami from the Turks and Caicos last year to meet with two Americans who wanted him to invest $2 million from a real estate deal.

Instead, they arrested him at the airport. The clients, who went by the names of “Bob” and “Abraham,” according to Poulin, were really federal agents who were targeting him as part of a money laundering sting. Poulin eventually pleaded guilty to conspiracy and spent a year in prison.

“My lawyer told me I should have known,” Poulin, 42, said in a telephone interview from his home in Quebec.

The U.S. has since brought charges against at least four other businessmen working as “incorporators” — people who help clients establish offshore shell companies for tax planning or other reasons. The cases come amid a campaign by U.S. prosecutors to pursue suspect foreign incorporators in countries where corporate secrecy laws and the demands of extradition have stifled investigative efforts. The strategy: Lure the service providers out of their overseas havens to the U.S. with aggressive techniques such as undercover operations, wiretaps and stings, case filings show.

This new front in the long-running battle against money-laundering is opening as part of a broader U.S. crackdown on tax evasion. Taxpayers who seek amnesty under Internal Revenue Service disclosure programs are snitching on the incorporators, as well as naming Swiss banks and the bankers who aided them.

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