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Swiss bank pleads guilty and receives hefty fine for violating US tax laws

As U.S. government investigators continue to follow money across the globe, the number of tax evasion prosecutions keeps increasing. Recently, the oldest Swiss private bank, Wegelin & Co., pleaded guilty to violating U.S. tax laws. The bank admitted to turning a blind eye on possible tax evasion through offshore bank accounts held by its American customers. In early March, a U.S. Federal District Court Judge ordered Wegelin to pay a total of $74 million.

The U.S. government alleged that Wegelin sought illegal banking business from UBS customers after that bank came under the scrutiny by the U.S. government. In a 2009 agreement with the U.S. government, UBS avoided criminal charges but paid $750 million and turned over the names of 4,500 U.S. taxpayers with secret offshore accounts.

Investigations spreading

Investigations now are turning to other banks in Switzerland as well as Israel, India, Hong Kong and elsewhere. For instance, government officials are reviewing whether HSBC Holdings PLC offered wealthy Indians secret offshore accounts. Last year, several prosecutions went after Israeli-American tax preparers who allegedly helped clients hide money in Israeli banks.

The Wall Street Journal reports that as part of offshore account investigations, the amount of unpaid taxes and penalties recovered in the last four years is now $5.5 billion. There have also been an estimated 38,000 confessions and the number is expected to increase.

Voluntary disclosure program

At the beginning of 2012, the Internal Revenue Service instated a third Offshore Voluntary Disclosure Program. This was after two prior successful programs in 2011 and 2009. Some of the changes from the prior programs included:

  • No specific deadline for people to disclose their offshore bank accounts – this program is unique in that it is ongoing
  • The penalty rate for the largest accounts increased from prior years to 27.5 percent
  • For smaller accounts, there is a lower possible penalty rate of five percent or 12.5 percent.

To disclose an offshore bank account complete and file a Report of Foreign Bank and Financial Accounts (FBAR). Those who have yet to disclose a foreign bank account should seek the counsel of an offshore bank account attorney to find out more details and avoid serious penalties.

Prosecution for failure to disclose

A prosecution for the willful failure to disclose offshore accounts can result in severe penalties. Fines are often a part of a civil penalty and can be up to $100,000 or 50 percent of the total value of the account, whichever is greater. Criminal tax evasion charges and prison time may also be possibilities.

It is unclear how much longer the voluntary disclosure program will be available. If an inheritance includes an overseas bank account, an experienced international taxation attorney can explain tax-filing requirements. In the case that you have not disclosed an offshore account now is the time to contact a tax attorney to discuss your situation.