Global Tax Enforcement

Global Tax Enforcement

Commentary on Tax Enforcement, News and Developments

Tax Day – Don’t forget your Offshore Disclosure Requirements

Posted in Offshore, Tax Controversy

Tax Return

On Tax Day it is a helpful reminder that a variety of income tax reporting obligations are associated with offshore assets. Any ownership of an asset that gives rise to income when those assets are located outside of the United States may need to be reported to the IRS. “Not only are assets held in financial institutions reported (Schedule B and Form 8938), but distributions from trusts and estates may also be reported with the annual income tax filings on Form 3520,” said Jim Mastracchio, Leader of BakerHostetler’s Criminal Tax Defense team. In addition, the 2014 FBAR reports will be due in June, giving the IRS and FinCEN additional information on foreign accounts. “Now is the time to ensure that all required filings are up to date,” added Mastracchio. “Any noncompliant taxpayer can take advantage of a variety of programs being offered by the IRS to come into compliance with income tax and informational reporting obligations for prior years.”

BSI Is First Bank to Reach Resolution in DOJ’s Program for Swiss Banks

Posted in Global Tax Enforcement, IRS, Swiss bank accounts

Swiss flagBSI of Lugano, Switzerland, became the first bank to earn a non-prosecution agreement under the U.S. DOJ’s Program for Swiss Banks, paying a penalty of $211 million. First announced on August 29, 2013, the program offered Switzerland-based banks that were not under criminal investigation the opportunity to avoid criminal investigation and prosecution in return for fully disclosing their dealings with U.S. accountholders and paying a penalty, among other conditions. Over 100 Swiss banks entered the program. According to the DOJ’s press release:

BSI helped its U.S. clients create sham corporations and trusts that masked the true identity of its U.S. accountholders. Many of its U.S. clients also opened “numbered” Swiss bank accounts that shielded their identities, even from employees within the Swiss bank. BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many U.S. accountholders without names visible on the card itself.

BSI not only helped U.S. clients shield their identity from the Internal Revenue Service (IRS). but helped them repatriate cash as well. BSI admitted that its relationship managers and their U.S. clients used code words in emails to gain access to funds. BSI disclosed instances where its U.S. clients would use coded language, such as asking their private bankers, “can you download some tunes for us?” or note that their “gas tank is running empty” when they required additional cash to be loaded to their cards . . . . BSI had more than 3,000 active United States-related accounts after 2008, many of which it knew were not disclosed in the United States. In resolving its criminal liabilities under the program, BSI provided extensive cooperation and encouraged hundreds of U.S. accountholders to come into compliance. BSI is also assisting with ongoing treaty requests.

Presumably, similar announcements from the other 100+ banks will be forthcoming.

Ex-Credit Suisse Bankers Sentenced to Probation in Exchange for Cooperation

Posted in Global Tax Enforcement, Tax Controversy

On March 27, 2015, a judge in the Eastern District of Virginia sentenced former Credit Suisse bankers Josef Doerig and Andreas Bachmann to five years of probation.  Their sentences were the result of their cooperation with the U.S. government’s global tax enforcement efforts.  Some outlets are reporting that they were key cooperators against Credit Suisse in the lead-up to Credit Suisse’s guilty plea.

Update: Spanish Arm of Banca Privada d’Andorra Succumbs After FinCEN Action

Posted in FinCEN, Tax Controversy

On March 16, 2015, the Spanish subsidiary of Banca Privada d’Andorra, Banco de Madrid, sought bankruptcy protection in the midst of a run on the bank by depositors. The run and bankruptcy were the result of FinCEN’s March 10, 2015, announcement that it would bar U.S. banks from providing correspondent banking services to Banca Privada d’Andorra or any bank that processes transactions for Banca Privada d’Andorra.

FinCEN Blacklists Banca Privada d’Andorra

Posted in FinCEN, Tax Controversy

On March 10, 2015, FinCEN designated Banca Privada d’Andorra, based in the Principality of Andorra, as a foreign financial institution of primary money-laundering concern pursuant to Section 311 of the USA PATRIOT Act (Section 311). FinCEN also issued a Notice of Proposed Rulemaking under which U.S. banks would be prohibited from providing correspondent banking services to Banca Privada d’Andorra or any bank that processes transactions for Banca Privada d’Andorra. FinCEN’s announcement discussed three examples of money-laundering activity that the bank allegedly facilitated.

  1. A high-level manager provided substantial assistance to Andrei Petrov, a third-party money launderer working for Russian criminal organizations engaged in corruption. In February 2013, Spanish law enforcement arrested Petrov for money laundering. Petrov is also suspected of having links to Semion Mogilevich, one of the FBI’s “Ten Most Wanted” fugitives.
  2. A high-level manager accepted exorbitant commissions to process transactions related to Venezuelan third-party money launderers. This activity involved the development of shell companies and complex financial products to siphon off funds from Venezuela’s public oil company, Petroleos de Venezuela. BPA processed approximately $2 billion in transactions related to this money-laundering scheme.
  3. A high-level manager accepted bribes in exchange for processing bulk cash transfers for another third-party money launderer, Gao Ping. Ping acted on behalf of a transnational criminal organization engaged in trade-based money laundering and human trafficking and established a relationship with BPA to launder money on behalf of this organization and numerous Spanish businesspersons. Through his associate, Ping paid exorbitant commissions to BPA bank officials to accept cash deposits into less-scrutinized accounts and transfer the funds to suspected shell companies in China. Spanish law enforcement arrested Ping in September 2012 for his involvement in money laundering.

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FinCEN Imposes Significant Fines In a Warning to Adhere to Due Diligence Requirements

Posted in FinCEN

In its recent decision to impose $20 million in sanctions upon Oppenheimer and Co. for the company’s failure to maintain internal controls to promote enforcement of the Bank Secrecy Act (BSA), FinCEN revealed the emphasis it places on financial institutions that may be inadvertently permitting unlawful transactions by independent bad actors. Although the financial institution may have no intention to assist in the evasion of any legal requirements imposed on its account holders, it is held accountable, to an extent that may even be considered punitive, to its inability to detect violations of legal requirements. These sanctions reaffirm the significance of the responsibility placed on financial services companies to conduct proper due diligence of their account holders, continuously monitor accounts for any potential suspicious activities and ensure full compliance with applicable anti-money-laundering laws. Approximately 10 years ago, Oppenheimer was fined $2.8 million by FinCEN for violations of the BSA. FinCEN’s decision to impose almost 10 times that for similar violations reflects not only its lack of tolerance for holes in due diligence procedures and internal controls of financial services entities, but the severe approach it intends to take for those companies that fail to correct such inadequacies. Oppenheimer’s failures resulting in FinCEN’s sanctions extended beyond actual failures by employees to conduct due diligence and monitor suspicious activities to the lack of measures in place to allow sharing of such information between departments. Thus, FinCEN’s approach to reviewing such policies and procedures is not only severe, but extremely broad.

FinCEN’s sanctions on Oppenheimer should place financial services companies on notice to ensure their procedures, internal controls, due diligence requirements, and availability of all of this information among all departments are sufficient to catch any potential unlawful activities by its account holders.

Former Wegelin Banker Reportedly Arrested on U.S. Warrant in Germany

Posted in Tax Evasion

Multiple outlets are reporting that on February 2, 2015, three years after his indictment in the Southern District of New York, Swiss banker Roger Keller was arrested at the Frankfurt airport. On January 3, 2012, the U.S. Attorney for the Southern District of New York indicted Wegelin Bank, Keller, Urs Frei, and Michael Berlinka, for assisting customers in evading taxes. In 2013, Wegelin pleaded guilty and agreed to cease operations. Keller awaits extradition to the U.S. to face trial, while Frei and Berlinka remain fugitives.

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 >>