Offshore bank accounts are a hot topic in the tax world because the IRS recently released its newest voluntary offshore disclosure initiative. This program allows California taxpayers to disclose their offshore accounts and accept a penalty in lieu of criminal tax evasion charges.
The IRS’ handling of offshore accounts consists of a carrot and stick approach. Although the offshore disclosure initiative is a “get out of jail free” card for many taxpayers, the IRS also aggressively pursues offshore bank account holders and the banks which help them hide assets. The most recent development in this area is the Justice Department’s charges against Switzerland’s oldest bank.
The Justice Department says that Wegelin & Co. aided American taxpayers in tax evasion schemes by setting up accounts for them under false names or shell companies. Three Wegelin bankers were indicted in connection with this scheme and many tax fraud cases against American citizens may arise out of information that the 271-year-old bank will hand over to prosecutors.
“Wegelin Bank aided and abetted U.S. taxpayers who were in flagrant violation of the tax code,” a prosecutor said. “And they were undeterred by the crystal clear warning they got when they learned that UBS was under investigation for the identical practices.”
UBS was fined $780 million for its handling of American offshore accounts. UBS also handed over the account information of its US clients to prosecutors. Authorities say that Wegelin took note of the UBS prosecution and stepped up as an alternative for US taxpayers who were seeking to hide assets. It is unclear how many taxpayers will face prosecutions as a result of Wegelin’s charges.
Source: CNN Money, “U.S. charges oldest Swiss bank in tax fraud case,” James O’Toole, Feb. 2, 2012