Global Tax Enforcement

Global Tax Enforcement

Commentary on Tax Enforcement, News and Developments

Bank Leumi Enters Into DPA with U.S. Department of Justice

Posted in Offshore, Tax Controversy

On December 22, 2014, the Department of Justice announced its agreement with Bank Leumi:

 Bank Leumi Admits to Assisting U.S. Taxpayers in Hiding Assets in Offshore Bank Accounts

 A major Israeli international bank admitted that it conspired to aid and assist U.S. taxpayers to prepare and present false tax returns to the Internal Revenue Service (IRS) by hiding income and assets in offshore bank accounts in Israel and elsewhere around the world.  A deferred prosecution agreement between the Bank Leumi Group and the Department of Justice was filed today in the Central District of California that defers prosecution on a criminal information charging the bank with conspiracy to aid and assist in the preparation and presentation of false tax returns and other documents to the Internal Revenue Service.  This unprecedented agreement marks the first time an Israeli bank has admitted to such criminal conduct which spanned over a 10 year period and included an array of services and products designed to keep U.S. taxpayer accounts concealed at Bank Leumi Group’s locations in Israel, Switzerland, Luxembourg and the United States. Read the full press release from the Department of Justice >>

Singapore Signs FATCA IGA

Posted in FATCA

On December 9, 2014, Singapore’s Inland Revenue Authority announced that Singapore and the United States had on that day entered into a Model 1 FATCA IGA.  This means that Singaporean financial institutions will report information on certain U.S. accounts to the Inland Revenue Authority, which will then send the information to the IRS. The text of the IGA makes no reference to the U.S. having any reciprocal obligations regarding Singaporean accounts at U.S. financial institutions, but the Inland Revenue Authority’s press release alludes to future reciprocity: “Singapore and the US have been discussing a reciprocal FATCA arrangement, under which the U.S. would extend similar cooperation to Singapore.”

Treasury Announces Relief for Countries with In-Substance FATCA IGAs

Posted in FATCA

On December 1, 2014, the U.S. Treasury Department announced that countries that have reached FATCA inter-governmental agreements (IGAs) in substance but have not signed the agreements by the December 31 deadline will, under some conditions, still be treated as having intergovernmental agreements in effect. Treasury said that to be treated this way, the jurisdictions must demonstrate “firm resolve” to sign the IGAs as soon as possible.  After December 31, Treasury will review the list of countries with in-substance agreements monthly to determine whether it will continue to treat those countries as having IGAs in effect. The determination will be based on a country’s responsiveness to communications from the U.S. regarding the IGA, and whether the country has raised concerns regarding its ability to sign or bring into force the text that was agreed to in substance.

Hong Kong Signs FATCA IGA

Posted in FATCA

On November 13, 2014, Hong Kong announced that it had signed a Model 2 FATCA IGA.  Under the agreement Hong Kong financial institutions will enter into separate FFI agreements with the IRS and will report information on U.S. account holders directly to the IRS.  Hong Kong indicated its intention to sign a Model 2 IGA when it agreed “in substance” to a Model 2 IGA on May 9, 2014.

FinCEN Strikes at Virtual Currency Anonymity, Rules that Virtual Currency Converter is a Money Services Business Under Bank Secrecy Act

Posted in FinCEN

On October 27, 2014, FinCEN ruled in response to a Request for Administrative Ruling that a company that converts traditional currencies into Bitcoin to facilitate payments must comply with regulations that govern Money Services Businesses under the Bank Secrecy Act. The company at issue operates by receiving payment from a buyer or debtor in “currency of legal tender” and transfers the equivalent in Bitcoin to the seller or creditor, minus a transaction fee.

The significance of FinCEN’s ruling for such a company is that the company must engage in record keeping and reporting that would pierce a customer’s anonymity.

FinCEN held:

As a money transmitter, the Company will be required to (a) register with FinCEN, (b) conduct a comprehensive risk assessment of its exposure to money laundering, (c) implement an Anti-Money Laundering Program based on such risk assessment, and (d) comply with the recordkeeping, reporting and transaction monitoring obligations set down in Parts 1010 and 1022 of 31 CFR Chapter X. Examples of such requirements include the filing of Currency Transaction Reports (31 CFR § 1022.310) and Suspicious Activity Reports (31 CFR § 1022.320), whenever applicable, general recordkeeping maintenance (31 CFR § 1010.410), and recordkeeping related to the sale of negotiable instruments (31 CFR § 1010.415). Furthermore, to the extent that any of the Company’s transactions constitute a “transmittal of funds” (31 CFR § 1010.100(ddd)) under FinCEN’s regulations, then the Company must also comply with the “Funds Transfer Rule” (31 CFR § 1010.410(e)) and the “Funds Travel Rule” (31 CFR § 1010.410(f)).

Switzerland Announces Intention to Change from Model 2 IGA to Model 1

Posted in FATCA

On October 8, 2014, Swiss officials announced that they intend to negotiate a reciprocal Model 1 FATCA IGA to replace the Model 2 IGA that they signed in 2013.  The motivation for the change is unknown, but the automatic exchange of information under Model 1 is more in line with emerging international norms.

Forensic Accountant and Certified Fraud Examiner Pleads Guilty to Concealing UBS Account

Posted in Swiss bank accounts, Tax Fraud

On October 3, 2014, according to a U.S. Attorney’s Office press release and court records, Howard Bloomberg, a forensic accountant and certified fraud examiner, pleaded guilty to one count of failure to file an FBAR reporting his interest in a bank account at UBS in Switzerland.  The account, which Bloomberg opened in 1997, held as much as $930,000 in 2001.  In April 2008, Bloomberg requested that UBS close his account and wire approximately $540,000 to an American account.  His sentencing will take place in federal district court in Atlanta on December 19, 2014.

Bank Julius Baer Customer Implicated in Alleged Tax Fraud

Posted in Tax Fraud

Reuters is reporting that Bank Julius Baer is cooperating with French authorities in their criminal investigation into an alleged value-added-tax (“VAT”) fraud in the EU Emissions Trading System.  In July, Bank Julius Baer announced that it was involved in a tax fraud investigation involving a former client and that it was suspected of exercising a “lack of due diligence in financial transactions.”  The article cites sources as saying that the bank received the proceeds of the VAT fraud, which involved moving goods across national borders without paying VAT and re-selling the goods for amounts that included the VAT that was evaded.

Brazil Signs Reciprocal Model 1 FATCA IGA

Posted in FATCA

On September 23, 2014, Brazil signed a FATCA IGA. The agreement is a Model 1 agreement, meaning that Brazilian financial institutions will report information about U.S. customers’ accounts to the Secretariat of the Federal Revenue of Brazil, which will then send that information to the IRS.  The agreement is reciprocal, meaning that the IRS will report information about Brazilian customers’ accounts at U.S. financial institutions to the Brazilian tax authority.  This reciprocity is made possible by new regulations requiring U.S. banks to collect more information about their account holders, which this blog covered here.