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Jordanian Bank FATCA Letters

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As FATCA continues its triumphant march across the globe, banks from more and more countries continue to send out FATCA letters to their US customers. Recently, the banks in the Kingdom of Jordan sent out additional FATCA letters (hereinafter, “Jordanian Bank FATCA Letters”). Jordanian Bank FATCA letters caught many U.S. taxpayers by surprise; some even refuse to believe that they are obligated to provide this type of information to their banks. Yet, noncompliance with the requests of Jordanian Bank FATCA Letters may have grave consequences for US taxpayers.

FATCA Background

The Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to target tax noncompliance of U.S. taxpayers with foreign accounts. Since its enaction, this law established a new global standard for tax information exchange. More than 110 jurisdictions today operate under the worldwide reach of FATCA.

In essence, FATCA is used by U.S. authorities to obtain information regarding foreign accounts held by U.S. persons directly from foreign financial institutions by forcing these institutions to collect and send to the IRS information required by FATCA. Hence, FATCA effectively turns all FATCA-compliant foreign banks into IRS informants.

Additionally, FATCA requires U.S. taxpayers to report “Specified Foreign Assets” (this is a term of art in international tax law) on Forms 8938. Forms 8938 should be attached to the taxpayers’ U.S. tax returns and filed with the IRS.

Jordanian Bank FATCA Letters

FATCA is implemented worldwide through a network of bilateral treaties, which are divided in to Model 1 and Model 2 treaties. However, individual banks can also comply with FATCA without Model 1 and Model 2 treaties. A minority of countries follow this path, and the Kingdom of Jordan is one of them.

This means that Jordanian Bank FATCA Letters are sent out by Jordan banks not due to any Model 1 or Model 2 treaties between the United States and Jordan, but, rather, through direct FATCA compliance (i.e. Jordanian banks register with the IRS and provide the required information directly to the IRS).

The purpose of the Jordanian Bank FATCA Letters are similar to all other FATCA Letters – obtain the information required to be reported under FATCA by foreign financial institutions to the IRS. In particular, this includes information relevant to the account owner’s U.S. tax residency.

Impact of Jordanian Bank FATCA Letters on U.S. taxpayers with Undisclosed Foreign Accounts

Jordanian Bank FATCA Letters may have very important impact on U.S. taxpayers with undisclosed foreign accounts. In this article I want to emphasize the timing aspects of such letters.

By requesting FATCA information, Jordanian Bank FATCA Letters create a timetable for timely voluntary disclosure of the concerned U.S. taxpayers. First of all, the taxpayers who receive Jordanian Bank FATCA Letters have a deadline (ranging usually between 30-45 days, and, occasionally, 90 days) to file the letter with the bank. Since the bank sends the information supplied by U.S. taxpayers to the IRS, these U.S. taxpayers have a limited window of opportunity to timely disclose their foreign accounts. If a taxpayer refuses to provide the required information, the bank may still report him to the IRS as a “recalcitrant taxpayer” and even close his accounts.

Additionally, there is a more subtle impact of Jordanian Bank FATCA Letters on U.S. taxpayers – a notice of existence of FATCA and other U.S. tax reporting requirements. A lot of U.S. taxpayers are able to utilize Streamlined Procedures due to the fact that they did not know about the U.S. tax reporting requirements with respect to foreign accounts and foreign income. However, once U.S. taxpayers receive Jordanian Bank FATCA Letters, they can only claim their lack of knowledge with respect to prior years. It will be very difficult to sustain this argument with respect to current and future tax years.

Contact Sherayzen Law Office if You Received a FATCA Letter (from Jordan or from Any Other Country)

If you received a FATCA Letter from a foreign bank, contact Sherayzen Law Office for professional help. Our experienced legal team will thoroughly analyze your situation, propose the best strategy with respect to responding to the FATCA Letter, review your voluntary disclosure options and prepare all legal and tax documents to complete your voluntary disclosure.

Call Us Today to Schedule Your Confidential Consultation!

Rothschild Bank AG Signs Non-Prosecution Agreement

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On June 3, 2015, the US Department of Justice (“DOJ”) announced that Rothschild Bank AG (Rothschild bank) have reached resolution under the department’s Swiss Bank Program.

Rothschild Bank Facts

Rothschild Bank was founded in 1968 and is headquartered in Zurich, Switzerland. Rothschild Bank offered services that it knew could and did assist U.S. taxpayers in concealing assets and income from the Internal Revenue Service (IRS), including code-named accounts, numbered accounts and hold mail service, where Rothschild Bank would hold all mail correspondence for a particular client at the bank. These services allowed certain U.S. taxpayers to minimize the paper trail associated with the undeclared assets and income they held at Rothschild Bank in Switzerland.

For a number of years, including after Swiss bank UBS AG announced in 2008 that it was under criminal investigation, and following instructions from certain U.S. taxpayers, Rothschild Bank serviced certain U.S. customers without disclosing their identities to the IRS. Some of Rothschild Bank’s U.S. clients had accounts that were nominally structured in the names of non-U.S. entities. In some such cases, Rothschild Bank knew that a U.S. client was the true beneficial owner of the account but nonetheless obtained a form or document that falsely declared that the beneficial owner was not a U.S. taxpayer.

Since August 1, 2008, Rothschild Bank had 66 U.S.-related accounts held by entities created in Panama, Liechtenstein, the British Virgin Islands, the Cayman Islands or other foreign countries with U.S. beneficial owners. At least 21 of these accounts had false IRS Forms W-8BEN in the file, which are used to identify the beneficial owner of an account. Rothschild Bank knew it was highly probable that such U.S. clients were engaging in this scheme to avoid U.S. taxes but permitted these accounts to trade in U.S. securities without reporting account earnings or transmitting any withholding taxes to the IRS, as Rothschild Bank was required to do.

Rothschild Bank also opened accounts for U.S. taxpayers who had left other Swiss banks that the Department of Justice was investigating, including UBS. Since August 1, 2008, Rothschild Bank had 332 U.S.-related accounts with an aggregate maximum balance of approximately $1.5 billion. Of these 332 accounts, 191 accounts had U.S. beneficial owners and an aggregate maximum balance of approximately $836 million.

Rothschild Bank Penalties and Disclosures

In accordance with the terms of the Swiss Bank Program, the Rothschild bank mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations. Nevertheless, Rothschild Bank will pay a penalty of $11.51 million.

Rothschild Bank also made numerous disclosures of various information regarding US-held accounts.

Consequences of Rothschild Bank Non-Prosecution Agreement for US Taxpayers

The most immediate impact of Rothschild Bank Non-Prosecution Agreement will be felt by US accountholders who wish to enter OVDP after June 3, 2015 – their penalty rate will go up from 27.5 percent of the highest value of their foreign accounts and other assets included in the OVDP penalty base to a whopping 50 percent penalty rate.

Furthermore, the US taxpayers with undisclosed accounts which were related in any way to Rothschild Bank face an increased risk of IRS detection due to transfer information turned over to the DOJ by Rothschild Bank. “The days of safely hiding behind shell corporations and numbered bank accounts are over,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Department of Justice’s Tax Division. “As each additional bank signs up under the Swiss Bank Program, more and more information is flowing to the IRS agents and Justice Department prosecutors going after illegally concealed offshore accounts and the financial professionals who help U.S. taxpayers hide assets abroad.”

Finally, the rest of the US taxpayers with undisclosed accounts must contemplate a potential future that their accounts maybe subject to IRS discovery if the Program for Swiss Banks is extended to other countries. This possibility is increasingly real when one takes into account the impact FATCA has had on the global international tax reporting landscape.

What Should US Taxpayers with Undisclosed Foreign Accounts Do?

If you have undisclosed foreign account and other foreign assets, you should immediately commence the review of your voluntary disclosure options. Since the introduction of the Streamlined Procedures, the IRS has opened up a world of reduced penalties to various non-willful taxpayers. Willful taxpayers should realize that, the longer they wait, the worse their tax position may become.

In order to do your voluntary disclosure properly, please consult Mr. Eugene Sherayzen, an experienced international tax lawyer of Sherayzen Law Office. We have helped hundreds of US taxpayers worldwide and we can help you.

Contact Us to Schedule Your Confidential Consultation Now!