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Swiss Program for Banks and Undisclosed Bank Accounts in Israel

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With the DOJ Program for Swiss Banks raging in Switzerland, an obvious question arises about whether this program would be applicable in other places, most prominently, to undisclosed bank accounts in Israel. It is my opinion, as an international tax attorney, that the DOJ will attempt to apply its Swiss Program for Banks to other places, including undisclosed bank accounts in Israel.

Background Information on the Program for Swiss Banks

On August 29, 2013, the DOJ announced a new initiative – The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program) – which is intended to allow Swiss banks to bring themselves into compliance with DOJ requirements and avoid any US enforcement action in exchanged for detailed disclosures and, in some cases, the payment of monetary penalties.

In essence, this is a voluntary disclosure program, only for Swiss Banks. Under the Program, the Swiss banks are required to turn over a vast amount of extensive and detailed information regarding its US account holders, including list the value of accounts greater than $50,000 during three separate periods; on an account by account basis, the highest value during the period beginning August 1, 2008; the number of persons affiliated with the account and their functions; whether the account was held in a structure (a foreign corporation, foundation, etc.), et cetera.

In return, the banks that participate in the Program can use it to effectively close-out any potential U.S. compliance issues and prevent future criminal prosecution of the banks.

Benefits of the Program for the IRS

The Program offers tremendous benefits to the IRS; I will just list the chief long-term benefits. First and foremost, it is unrealistic for the IRS and the DOJ to investigate every single bank in Switzerland by itself. In essence, the Program allows the IRS to achieve this goal by using the banks themselves to investigate whether they are compliance with U.S. tax laws.

Second, the Program will provide the IRS with a tremendous amount of information regarding the schemes and techniques used by non-compliant U.S. taxpayers and their advisors (as well as the identify of these advisors). This will allow the IRS to develop the procedures to quickly identifying and investigating future potential non-compliance schemes.

Finally, the Program has the potential to identify all of the non-compliance U.S. taxpayers with undisclosed accounts in Switzerland as well as to trace whether these funds were taken out of Switzerland and moved elsewhere, especially to undisclosed bank accounts in Israel (which is already a major target for the DOJ).

As I mentioned before, there are many more other advantageous to the program; among them: establishing the precedent for future use of a similar program in another country, focusing the investigation on particular individuals and banks, and the high publicity of the program should force banks in other countries to step-up their compliance with U.S. tax laws (in case a similar approach is adopted in their countries).

The Program Is Ready to be Applied to Other Countries, including Israel

Because of its tremendous utility to the DOJ and the IRS, I believe it is highly possible that the Program will be applied in other countries, though, most likely in a modified form. The exact form of the Program is likely to be dependent on the type of the FATCA treaty that was signed between the United States and the target country as well as the target country’s government and its willingness to give in to the U.S. demands for transparency.

It is also not inconceivable that the Program will be eventually applied worldwide so that every non-compliant bank would have an opportunity to enter it. However, it is perhaps a bit premature to discuss when such a program would be enacted and what shape it would take.

The likelihood that the Program would be applied to undisclosed bank accounts in Israel is very high. First, Israel is already a focus of several DOJ investigations. Second, the IRS can already confirm (and will find more evidence of this happening after the banks submit the required information under the Program) that numerous bank accounts were closed in Switzerland by Israeli-Americans and moved elsewhere. Finally, it appears that the Israeli government would likely cooperate with the U.S. government in this area.

High Risks for U.S. Persons with Undisclosed Bank Accounts in Israel

At this point, the situation has grown intolerably dangerous for U.S. taxpayers with undisclosed bank accounts in Israel. Not only are they already potentially subject to the IRS investigation, but, if the Program is applied in Israel, there will be no safe haven for non-compliant U.S. taxpayers with undisclosed bank accounts in Israel.

In such a situation, the most prudent step for U.S. taxpayers with undisclosed bank accounts in Israel would be to retain an international tax attorney experienced in offshore voluntary disclosures in order to conduct some type of a voluntary disclosure before it is too late.

Contact Sherayzen Law Office for Professional Help with Undisclosed Bank Accounts in Israel

If you have undisclosed bank accounts in Israel, you should contact Sherayzen Law Office to conduct your offshore voluntary disclosure. Our firm consists of international tax professionals highly experienced in the offshore voluntary disclosure matters. We will thoroughly analyze your case, determine the available voluntary disclosure options for your offshore assets, and meticulously implement the chosen plan of action (including preparation of all legal documents and tax forms). Contact Sherayzen Law Office

France FATCA Agreement Signed

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On November 14, 2013, the U.S. Department of the Treasury announced that the United States has signed an intergovernmental agreement (IGA) with France to implement the Foreign Account Tax Compliance Act (FATCA). Enacted in 2010, France FATCA IGA aims to curtail offshore tax evasion by facilitating the exchange of tax information. With France FATCA IGA, 10 FATCA IGAs have been signed to date (Denmark, France, Germany, Ireland, Mexico, Norway, Spain, United Kingdom, Japan and Switzerland).

“France has been an enthusiastic supporter of our effort to promote global tax transparency and critical to drafting a model of FATCA implementation,” said Deputy Assistant Secretary for International Tax Affairs Robert B. Stack. “This agreement demonstrates the growing global momentum behind FATCA and strong support from the world’s most important economies.”

France was among the first countries to champion the underlying goals of FATCA and its intergovernmental approach in 2012. France FATCA IGA was signed today by U.S. Ambassador to France Charles H. Rivkin and French Finance Minister Pierre Moscovici.

“The signing of this agreement marks an important step forward in the collaboration between the United States and France to combat tax evasion,” said Ambassador Rivkin.

FATCA seeks to obtain information on accounts held by U.S. taxpayers in other countries. It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders. FFIs have the option of entering into agreements directly with the IRS, or through one of two alternative Model IGAs signed by their home country.

The IGA between the United States and France is the Model 1A version, meaning that FFIs in France will be required to report tax information about U.S. account holders directly to the French government, which will in turn relay that information to the IRS. The IRS will reciprocate with similar information about French account holders.

In addition to the 10 FATCA IGAs that have been signed to date, Treasury has also reached 16 agreements in substance and is engaged in related conversations with many more jurisdictions.

Contact Sherayzen Law Office For Help With Undisclosed Accounts in France

If you have undisclosed financial accounts in France, contact Sherayzen Law Office for professional IRS representation. Our team consists of dedicated, experienced tax professionals who will thoroughly analyze your case, advise on the available voluntary disclosure options, prepare all necessary tax forms and legal documents, and professionally represent your interests through the IRS voluntary disclosure process.

Offshore Voluntary Disclosure Lawyers: Eligibility for Program for Swiss Banks

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As offshore voluntary disclosure lawyers know very well, Switzerland continues to be the center of the unprecedented IRS and US Department of Justice enforcement of U.S. international tax laws, including FATCA. In a recent article, I described a new initiative, The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (the “Program”), which is essentially a voluntary disclosure program for Swiss banks. In the Program, eligible banks can avoid US criminal prosecution in exchange for detailed disclosure of the accounts owned by U.S. taxpayers (as well as, in some cases, payment of monetary penalties).

The issue is: what banks in Switzerland are eligible to participate in the program? The issue is not only relevant to the banks themselves, but also for U.S. accountholders in Switzerland how have and have had foreign financial accounts in Switzerland during any time between January 1, 2008 and the present time. The chief reason is because these are accounts are most likely to be disclosed as early as the first quarter of 2014, thereby very likely preventing these U.S. taxpayers from entering into the OVDP program since closed.

Swiss Banks Under Grand Jury Investigation Are Not Eligible

Swiss banks which are classified by the DOJ as Category 1 banks are not eligible to participate in the Program. Currently, there are at least fifteen banks which are included in this category. Most likely (thought not officially named by the DOJ) these banks are: Julius Baer Group AG, Credit Suisse, Rahn & Bodmer, Zuercher Kantonalbank, Basler Kantonalbank, Bank Hapoalim, Mizrahi-Tefahot Bank, Bank Leumi and others.

Types of Institutions Open to the Program

Many Offshore Voluntary Disclosure Lawyers pay close attention to the fact that the Program applies only custodial and depository financial institutions.

So, Swiss insurance companies, various fiduciaries, and many other investment companies cannot take advantage of the Program). It is not open to individuals; hence, asset managers, financial advisors and lawyers cannot participate in the program.

Impact on Offshore Voluntary Disclosure Program in the United States

If you are the taxpayer with an undisclosed financial account in a Swiss Bank that is eligible to participate in the Program, you need to consider your voluntary disclosure options immediately. As many offshore voluntary disclosure lawyers will tell you, if the IRS receives the information from a Swiss bank participating in the Program before you disclosure your account and initiates an investigation against you, it is very likely that you will not be accepted into the Offshore Voluntary Disclosure Program.

I expect that the letters sent out by the Swiss banks which intend to participate in the Program to their current and former U.S. customers will have a dramatic impact on the rising number of participants in the OVDP or OVDI. In fact, this trend can already be observed from the fact over 40,000 people have already participated in the IRS offshore voluntary disclosure programs.

Contact Sherayzen Law Office for Help with Your Undisclosed Swiss Bank Accounts

If you currently have undisclosed foreign accounts in Switzerland or you had such accounts at any point prior and after January 1, 2008, and closed these accounts, contact Sherayzen Law Office for help with your offshore voluntary disclosure options. Our experienced offshore voluntary disclosure tax firm will thoroughly review your case, estimate your existing tax and FBAR liability in the United States, identify the available voluntary disclosure options, prepare your voluntary disclosure package (including all legal documents and tax forms) and rigorously defend your interests during your negotiations with the IRS.

Offshore Voluntary Disclosure Attorney: Introduction to Program for Swiss Banks

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Since the early 2000s, the IRS has engaged in a multi-layered effort to enforce U.S. tax laws overseas, in particular (at least from the perspective of an offshore voluntary disclosure attorney) curb tax evasion in Switzerland with the emphasis on undisclosed Swiss financial accounts (mainly FBAR compliance). In 2008, the U.S. Department of Justice (DOJ) scored a major victory in the now-famous UBS case.

Since that case, DOJ has pursued a large number of criminal investigations against the U.S. accountholders, Swiss tax and financial advisors and, actually, Swiss banks. There has also been a tremendous surge in IRS civil audits and John Doe summons. Even the Whistleblower Office became engaged in the international tax compliance efforts. A number of new laws and treaties, stemming from FATCA, have been utilized by the U.S. government in its worldwide efforts to increase U.S. tax compliance internationally.

As the DOJ increased its pressure on the U.S. taxpayers who have undisclosed foreign accounts, the IRS created a number of voluntary disclosure programs, 2012 Offshore Voluntary Disclosure Program (OVDP) being the latest example. As of September of 2013, it is estimated that about 40,000 U.S. taxpayers have voluntary participated in this program OVDP is now closed.

The Program – Voluntary Disclosure Program for Swiss Banks

On August 29, 2013, the DOJ announced a new, unprecedented initiative – The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program) – which is intended to allow Swiss banks to bring themselves into compliance with DOJ requirements and avoid any US enforcement action in exchanged for detailed disclosures and, in some cases, the payment of monetary penalties.

In essence, this is a voluntary disclosure program. Unlike the OVDP, however, this is “OVDP” for foreign banks in a foreign country! This is a truly unique reach that the DOJ and IRS have achieved in a country which has been celebrated for centuries for its bank secrecy laws.

Outlines of Required Disclosure

Under the Program, the Swiss banks are required to turn over a vast amount of extensive and detailed information regarding its account holders, including providing the following information: description of how the banks structured, operated and supervised their cross-border activities; list of names and functions of all individuals who participated in any of this activity; description of how a bank marketed its services to U.S. persons and serviced their accounts; list the value of accounts greater than $50,000 during three separate periods; on an account by account basis, the highest value during the period beginning August 1, 2008; the number of persons affiliated with the account and their functions; whether the account was held in a structure (a foreign corporation, foundation, etc.); whether it held U.S. securities; the name and role of any outside advisor affiliated with the account; information about transfers of funds into or out of the account; and other detailed information (note: these are some of the disclosure requirements, but there are many more – contact offshore voluntary disclosure attorney Eugene Sherayzen at Sherayzen Law Office for more information).

In essence, with this information, the IRS and DOJ can freely pursue civil and criminal investigations of U.S. persons who have had undisclosed bank accounts since 2008 (and possibly earlier).

Consequences for Swiss Banks

The banks who participate in the Program can use the it to effectively close-out any potential U.S. compliance issues and prevent future criminal prosecution of the banks. The hope is that it will enable Swiss banks to put this issue behind them and enable them to develop a more attractive investment environment in the future.

Consequences for U.S. Accountholders

As any offshore voluntary disclosure attorney will tell you, the consequences for the U.S. accountholders with undisclosed accounts in Switzerland are infinitely more dire. Armed with such detailed information, the IRS should have no problems auditing and, ultimately, prosecuting U.S. taxpayers who are not compliant with U.S. tax laws.

Furthermore, those individuals who have engaged in quiet disclosure at any point since 2008 are under severe risk of exposure and potential prosecution. For example, if a U.S. taxpayer had an undisclosed account since 2004 and engaged in quiet disclosure in 2012, he may now potentially face an IRS audit for all years going back to 2007 (and potentially further).

Additionally, there is a great uncertainly for U.S. taxpayers with Swiss accounts who wish to enter the OVDP, because their accounts may have already been disclosed independently by Swiss banks to the IRS. In this case, the OVDP participation may be precluded.

Contact Sherayzen Law Office for Legal Help with Undisclosed Swiss Accounts

If you have undisclosed Swiss accounts at any point since 2005, contact Sherayzen Law Office for professional help. Our international tax law firm is highly experienced in the voluntary disclosures of foreign financial accounts and other offshore assets. We will thoroughly analyze your case, determine the available voluntary disclosure options for your offshore assets, and meticulously implement the chosen plan of action (including preparation of all legal documents and tax forms).

Accountants Beware: FBAR Disclosure is a Legal Matter

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Paradoxically, one of the obstacles currently facing U.S. taxpayers who wish to file their delinquent FBARs and conduct a voluntary disclosure of their foreign assets are their own accountants – more precisely, the inability of many accountants to understand that FBAR disclosure is a legal matter to a much greater extent than an accounting matter.

Special Nature of the FBAR

FBAR is unlike any other information return issued by the IRS. While there are many reasons for it, I just want to point out the four most important considerations that make FBAR disclosures so radically different from other disclosures. First of all, FBAR is issued under the auspices of the Department of the Treasury, but only in the early 2000s was the enforcement of FBARs transferred to the IRS. This is why FBAR does not constitute a part of a taxpayer’s tax return and should be filed separately to a different address by June 30 of each calendar year. The importance of this distinction is that the FBAR is not a regular tax form involving tax calculations, but a legal disclosure form which the taxpayer uses to report his or her foreign financial accounts.

Second, failure to file the FBAR timely is likely to have tremendous consequences for the taxpayer. The civil penalties can be overwhelming, and there are significant criminal penalties associated with the FBAR.

Third, the FBAR penalty structure is complex and allows for many instances of mitigation and exceptions, depending on the taxpayer’s particular situation and ability of the taxpayer’s representative to recognize this situation. There are very important strategies that may be employed during FBAR disclosures to the benefit of the taxpayers.

Finally, the mode of the offshore assets disclosure (i.e. the official IRS voluntary disclosure program and its alternatives) is closely tied to other international tax issues that must be recognized by the taxpayer’s representative. It is rare for the FBAR issue to come alone; usually, the taxpayer would have other international tax issues such as foreign rental income, PFICs, foreign tax credit, foreign earned income exclusion, ownership of foreign business entities, foreign trusts, foreign gifts, foreign inheritance, et cetera. All of these factors must be carefully considered in assessing the existing FBAR penalties (see point three above) and what penalties the taxpayer is likely to face depending on the mode of the offshore assets disclosure.

Accountants Mistakenly Treat FBAR Disclosure as an Accounting Matter

Unfortunately, most accountants have not learned to distinguish the special nature of the FBARs and the enormous complications associated with offshore assets disclosure. There are many reasons for it. First, the great majority of the accountants are not trained to recognize the international tax issues and has very little, if any, familiarity with international tax issues. Therefore, they fail to understand the very special nature of the FBAR and they treat it as simply another form to fill-out, ignoring the legal nature of the disclosure.

Second, even the accountants who are more familiar with international tax obligations of US taxpayers still fail to recognize the fact that FBARs carry criminal penalties and the taxpayers must be adequately protected while discussing the FBAR matters with their representatives.

Third, many accountants are unaware or simply ignore the complexity of the offshore disclosure involving FBARs. This results in taking the simplest approach of herding their clients into the official IRS offshore voluntary disclosure program, often without adequate explanation of the consequences of such a move to their clients.

Fourth, the accountants are not trained for advocacy. Therefore, instead of analyzing their clients’ particular facts and coming up with solutions for their clients, they simply calculate the penalties and present these calculations to their clients as a fact.

Finally, many taxpayers are used to dealing with tax accountants a lot more than with tax attorneys. Similarly, the accountants are aware of these expectations and they attempt to meet these expectations even at the cost of taking on the tasks about which they have little understand and virtually no training.

FBAR is a Legal Matter and Should Be Resolved By Tax Attorneys

Yet, it is highly important to understand that, by undertaking the task of advising their clients on FBAR disclosures, the accountants may be committing malpractice because FBAR is first and foremost a legal matter, not an accounting one. This is why all FBAR disclosures should be handled by tax attorneys who have the right tools and privileges to help their clients.

Let’s emphasize some of the advantages of legal profession that make attorneys so well-fit for FBAR disclosures.

First, the taxpayers with delinquent FBARs need to be able to relate the facts of their particular situations freely to their tax advisors. Since your accountant can be forced to testify against you by the IRS, the best and only protection is the Attorney-Client Privilege.

Second, FBAR is a legal disclosure document, not a tax document. International tax attorneys should use their experience and judgment in advising their clients on how the FBARs should be completed.

Third – and this is a critical factor – attorneys are experienced advocates who are trained to recognize problems and develop comprehensive ethical solutions aimed to minimize the risk of adverse legal exposure of their clients. This means that an experienced international tax attorney will analyze the facts of the particular case in front of him, identify all non-compliance issues, estimate the potential penalties and look for solutions to the problems of a particular case.

Contact Sherayzen Law Office for Legal Help with Your FBAR Disclosure

If you have undisclosed offshore assets, contact Sherayzen Law Office . Our experienced international tax firm will thoroughly analyze your case, estimate your potential FBAR penalties, identify all non-compliance issues, and develop a comprehensive approach to your offshore voluntary disclosure.