Why is it that when American taxpayers are discovered with undisclosed offshore bank accounts, they face severe penalties for tax evasion, but the banks almost always go unpunished? The fact is that in many cases, the banks are in the business of luring Americans into opening accounts overseas, and the banks are the ones who propose the schemes for hiding assets from the IRS.
Now, though, the federal government is considering a rule reinterpretation that would move beyond the days when the banks got a pass. We could see the day when the banks also would pay a severe monetary penalty for helping people hide assets in offshore bank accounts.
Penalties related to FBAR, or Foreign Bank and Financial Accounts, can be fifty percent of the account balance for each year of an undisclosed offshore bank account. That means people caught with these accounts can face penalties in amounts far beyond what is in the accounts.
The Department of Justice is now looking at how it can penalize the banks that encourage or allow Americans to hide assets overseas.
FBAR requires American taxpayers to disclose foreign accounts if together the accounts hold more than ten thousand dollars. The rules have been read in the past as applying only to American citizens and residents, not banks or foreigners.
Some experts are saying, though, that the rules could be read to allow the government to penalize any institution that willfully causes an FBAR violation. If so, the fifty percent penalty could be applied to all accounts at that bank that should have been disclosed to the IRS but were not.
Overseas banks are feeling the pressure of the renewed IRS interest in offshore bank accounts. In 2009, Swiss banking giant UBS paid a $780 million fine and admitted to criminal wrongdoing over its sale of offshore private banking services to many American clients. The $780 million was not an FBAR penalty, though.
The Justice Department showed what may be in store in its court filings regarding a senior Credit Suisse private banker, Christos Bagios. Federal prosecutors wrote that Mr. Bagios “could be forced to pay a FBAR penalty for as much as $19 million for just one tax year, and therefore face financial ruin.” This was based on the theory that Bagios encouraged various American clients to hide a total of $38 million from the IRS.
Orange County tax evasion lawyers note that the IRS currently has a voluntary disclosure program for holders of offshore accounts, and the program includes a break on the FBAR penalty.
Source: RSS Broadcast “Overseas Banks Could Face Novel Penalty From U.S.” 4/12/2011