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FATCA Criminal Case Filed Against Foreigners | FATCA Lawyer & Attorney

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On March 22, 2018, the US Department of Justice (“DOJ”) announced that it charged four foreign residents – Panayiotis Kyriacou (resides in London, UK), Arvinsingh Canaye (resides in Mauritius), Adrian Baron (resides in Budapest, Hungary), and Linda Bullock (resides in St. Vincent/Grenadines) – with conspiracy to defraud the United States by failing to comply with FATCA. Let’s explore this new FATCA criminal case in more detail.

Legal Basis for FATCA Criminal Case

The legal basis for this FATCA criminal case is the allegation that the defendants conspired to defraud the United States by obstructing the IRS administration of the Foreign Account Tax Compliance Act (“FATCA”).

FATCA was passed into law in 2010. One part of this highly complex law requires foreign financial institutions (“FFIs”) to identify their US customers, collect the information about foreign accounts held by these US customers as required by FATCA (“FATCA Information”) and send FATCA Information to the United States. The DOJ alleges that the defendants in this case intentionally conspired to obstruct the collection and reporting of FATCA Information to the IRS.

Facts of the FATCA Criminal Case As Alleged by the DOJ

The indictment alleges that the defendants agreed to defraud the United States by opening foreign bank and brokerage accounts without collecting FATCA information that should have been reported to the IRS. The indictment describes two specific schemes, both of which were uncovered by the DOJ through an undercover agent.

The first scheme is called the Beaufort Scheme, because Canaye and Kyriacou both worked at Beaufort Management as a general manager and an investment manager respectively. The indictment alleges that, between August 2016 and February 2018, these two defendants conspired to defraud the United States by failing to comply with FATCA. The DOJ states that it obtained the proof of the existence of this conspiracy through an undercover agent (the “Agent”).

The Agent first approached Kyriacou in 2016, who opened bank accounts for the agent without doing any FATCA compliance. In July 2017, Kyriacou introduced the Agent to Canaye and advised that Canaye could assist with the Agent’s stock manipulation scheme schemes. In January 2018, Canaye and Beaufort Management opened six global business corporations for the Agent. The Agent’s name did not appear on any of the account opening documents.

The second scheme is called the Loyal Scheme because it involved Baron, the Loyal Bank’s Chief Business Officer. During their meetings, the Agent explained to Baron that he was a US citizen and described his stock manipulation schemes, including the need to bypass FATCA. In July and August of 2017, the Undercover Agent met with Baron and Bullock, Loyal Bank’s Chief Executive Officer. During the meeting, the Undercover Agent described how his stock manipulation deals operated, including the necessity to bypass FATCA. In July and August 2017, Loyal Bank opened multiple bank accounts for the Agent. At no time did Loyal Bank request or collect FATCA Information from the Undercover Agent.

It should be remembered that the charges in the superseding indictment are merely allegations, and the defendants are presumed innocent unless and until proven guilty.

This FATCA Criminal Case Reflects IRS Commitment to FATCA Enforcement

While not the first FATCA criminal case, the present case is definitely at the beginning of the future series of FATCA cases against US taxpayers and foreigners. The IRS stressed that this FATCA criminal case reflects the commitment of the IRS and the DOJ to combat offshore tax evasion and enforce FATCA worldwide.

Sherayzen Law Office will continue to monitor IRS enforcement of FATCA, including this FATCA criminal case.

Cyprus Tax Amnesty Extended | FATCA Lawyer & Attorney

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For the second time now, the Cyprus Tax Amnesty has been extended. Let’s discuss in more detail the new deadline and the terms of the Cyprus Tax Amnesty.

Cyprus Tax Amnesty: Deadline Extensions

The original deadline for the Scheme for the Settlement of Overdue Taxes (the official name of the Cyprus Tax Amnesty) was October 3, 2017. The deadline, however, was extended for the first time to January 3, 2018. In early January of 2018, the deadline was further extended to the current deadline of July 3, 2018. Thus, the more recent extension gives Cyprus taxpayers another six months to bring their tax affairs in full compliance with Cyprus tax law.

Main Terms of the Cyprus Tax Amnesty

The Cyprus Tax Amnesty allows “qualifying applicants” to pay off their tax liabilities for prior years with up to 95% reduction in the interest and penalties that otherwise would have been or have already been imposed by the Cyprus tax authorities. The precise percentage of the reduction of interest and penalties depends on the number of monthly installment payments chosen by the taxpayer (i.e. if you pay off everything in full immediately, you get the full benefit of the 95% reduction in interest and penalties).

The Cyprus Tax Amnesty encompasses all outstanding tax liabilities that were incurred in the tax years up to and including 2015. The Amnesty also covers a great variety of taxes: income tax, capital gains tax, VAT, property tax, stamp duties, inheritance tax and certain special fees.

Cyprus Tax Amnesty: Qualifying Taxpayers

Since the main purpose of the Amnesty is to bring Cyprus taxpayers into full and ongoing compliance with Cyprus tax law, the emphasis is placed on assuring current compliance. This is done through the definition of “qualifying taxpayers” who are the only taxpayers eligible to participate in the Cyprus Tax Amnesty.

Qualifying taxpayers are defined as taxpayers who have been in full tax compliance from the tax year 2016 onwards – i.e. these taxpayers must have filed all of their Cyprus tax returns and paid all of their Cyprus tax liabilities for the tax year 2016 and all of the following tax years.

Cyprus Tax Amnesty is Part of a Trend Amplified by the IRS Offshore Voluntary Disclosure Program

The Cyprus Tax Amnesty is just one more example of the tax amnesty programs which have proliferated around the world in the recent years. This trend was greatly strengthened and really amplified to its current status by the establishment of the 2009 IRS Offshore Voluntary Disclosure Program (“2009 OVDP”). The 2009 OVDP, 2011 OVDI and 2012/2014 OVDPs together with enactment of FATCA have drawn the attention around the world and many countries began to imitate the successes of these US initiatives.

Sherayzen Law Office has helped clients deal with each of these major IRS voluntary disclosure programs as well as other voluntary disclosure options (like the Streamlined Domestic Offshore Procedures and the Reasonable Cause Disclosures). A voluntary disclosure program presents wonderful opportunities to taxpayers to settle their past tax noncompliance. This is why we sympathize with the Cyprus Tax Amnesty and see it as a positive development in the international tax law.

Swiss Voluntary Disclosures Rise as Swiss AEOI Compliance Nears

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The voluntary disclosures by Swiss taxpayers jumped dramatically in 2017. The most likely reason for the increase is the fact that the Swiss government started to collect information under its numerous Automatic Exchange of Information (“AEOI”) agreements. Let’s analyze in more detail this connection between the Swiss voluntary disclosures and the Swiss AEOI Compliance.

Swiss AEOI Compliance: Increase in Swiss Voluntary Disclosures

The increase in Swiss voluntary disclosures between 2015 and 2017 is undeniable. The Swiss said approximately 350,000 voluntary declarations were made in 2016, compared to 328,000 in 2015. While the numbers for 2017 for the entire country are not available, we can extrapolate the 2017 numbers based on the canton of Zurich.

On January 4, 2018, the canton of Zurich reported that there were almost three times as many of voluntary disclosures of unreported assets by Swiss taxpayers in 2017 than in 2016. A total of 6,150 voluntary disclosures were submitted in 2017 whereas only 2,100 voluntary disclosures were made in 2016. The disclosures brought in about 104 million Swiss francs of additional tax income in 2017; the 2016 number was only 85 million Swiss francs.

The Swiss government also stated that the 2017 voluntary disclosures concerning ownership of real estate in Italy, Portugal and Spain were especially high.

Swiss AEOI Compliance Has a Direct Impact on Swiss Voluntary Disclosures

The connection between Swiss AEOI compliance and the increase in the voluntary disclosures is obvious. In fact, the cantonal government of Zurich directly stated that it attributed the jump in voluntary disclosures to the Swiss AEOI agreements, especially those related to the EU countries.

Already in 2017, the Swiss government started collecting financial information about Swiss taxpayers in order to turn it over to its partner jurisdictions under the Swiss AEOI agreements. The exchange of information under the Swiss AEOI compliance obligations is scheduled to begin in the fall of 2018 for the calendar year 2017 and 2019 for the calendar year 2018.

The Swiss AEOI compliance obligations are very broad due to the fact that Switzerland signed AEOI agreements with 53 jurisdictions already, including the European Union. The European Union is considered to be a single jurisdiction even though it consists of twenty-eight countries. The EU-Switzerland AEOI agreement was approved by the Swiss Parliament in 2016.

The Connection Between Swiss AEOI Compliance and FATCA

As Sherayzen Law Office has repeatedly pointed out in the past, the passage of FATCA in the United States has completely changed the international tax landscape concerning international information exchange with respect to foreign accounts and other foreign assets. In fact, FATCA and the DOJ Program for Swiss Banks have completely destroyed the vaulted Swiss bank privacy laws (though, the 2008 UBS case made the first hole in this bastion of offshore privacy).

After seeing the success of FATCA with respect to US tax compliance, the rest of the world joined the party. The new Common Reporting Standard or CRS was the OECD’s response to FATCA with an ambition to force even more transparency than required by FATCA and making this transparency apply to the United States. The US government refused to join CRS, but it did not prevent the CRS into growing in as important of an international tax compliance standard as FATCA.

Additionally, the enforcement of FATCA had another side-effect: a rapid proliferation of the AEOI agreements, both bilateral and multilateral. The new web of AEOI agreements is growing larger with the passage of time forcing an ever greater international tax transparency. The recent Swiss AEOI compliance is just the latest example of this trend.

Will we ever see a reversal of this trend? It is a real possibility, but it is unlikely that it will be able to destroy the legal groundwork for greater tax transparency that has been laid out by FATCA, CRS and the AEOI agreements.

New Irish Software to Combat Offshore Tax Evasion | Tax Lawyer News

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The Irish Revenue is expanding its tax enforcement capabilities through new Irish software. This new Irish software will provide the Irish Revenue with a unique type of a multilateral analysis of a taxpayer in order to combat offshore tax evasion. This is definitely a new development in international tax enforcement and it is the one likely to be followed by other nations, including the United States.

New Irish Software Allows a Brand-New Versatile Analysis of a Taxpayer’s Life

The unique feature of the new Irish software is its multilateral analysis of a taxpayer. First of all, the software will match the data provided by taxpayer (or by other national institutions) with the data collected from other jurisdictions under the automatic information exchange agreements. So far, this is similar to the IRS FATCA software.

However, the new Irish software goes further: it will analyze the taxpayer’s social media accounts, statements, pictures and so on to see if the taxpayer’s posts about his lifestyle match the information provided by the taxpayer to the Irish Revenue. It appears that there are other features of the software which are not even disclosed to the public that also go beyond the traditional analysis of tax and financial documents.

In other words, the new software will do the data analysis that will allow the Irish Revenue to build a complete profile of Irish taxpayers and their activities. This is a very bold and creative approach to tax enforcement, but, as discussed below, it is completely within the logic of the recent trends in international tax enforcement.

The New Irish Software Comes After the Closure of the Irish Voluntary Disclosure Program

The new Irish software is being introduced by the Irish Revenue just about six months after the closure of the Irish voluntary disclosure program. The Irish Revenue received 2,734 disclosures with a declared value of almost 84 million before the program’s deadline for offshore disclosures on May 4, 2017.

Since the voluntary disclosure program is closed, the noncompliant taxpayers who will be identified by the new Irish software are likely to face substantially higher penalties.

Lessons to be Drawn from the New Irish Software With Respect to Future US Tax Enforcement

This latest development in Irish tax enforcement is indicative of the trend of using comprehensive data analytics through smarter, more aggressive software with elements of Artificial Intelligence to identify noncompliant taxpayers. This is the trend that will undoubtedly influence US tax enforcement. In fact, the IRS already has an advanced tax software to analyze FATCA data (which, right now, is filled with errors and not very effective). Moreover, the IRS has also stated that it will develop its own AI software to identify US international tax noncompliance.

Furthermore, it seems that there is a worldwide trend toward harsher international tax enforcement in lieu of continuation of the existing voluntary disclosure programs. The fact that the Irish Revenue unveiled new software after the closure of the voluntary disclosure program is also not an accident, but a planned course of events.

We can already observe the same trend here in the United States. The IRS is stepping up FBAR audits while the DOJ (US Department of Justice) is dramatically increasing its FBAR-related litigation. Additionally, the IRS has recently announced its intentions to seriously modify and even close its own voluntary disclosure programs.

The combination of all of these trends means that noncompliant US taxpayers are at an extremely high risk of detection at the time when most of their voluntary disclosure options are being closed or significantly modified. This is why this is the critically-important time for these taxpayers to explore their voluntary disclosure options while they are still available. Failure to do so now may lead to extremely unfavorable tax consequences, including the imposition of substantially higher IRS penalties.

Contact Sherayzen Law Office for Professional Help with Your Offshore Voluntary Disclosure

If you have undisclosed foreign assets (including foreign bank and financial accounts) or foreign income, please contact Sherayzen Law Office as soon as possible. Our international tax law firm has successfully helped hundred of US taxpayers with their offshore voluntary disclosures. We can help You!

Contact Us Today to Schedule Your Confidential Consultation!

What is a FATCA Letter?

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Over eight million U.S. taxpayers are expected to receive FATCA letters from their foreign banks. The first reaction of most taxpayers is to ask: “What is a FATCA letter?” The next question is: “What should I do if I receive(d) a FATCA Letter?” This article intends to answer both questions.

The FATCA Letter

A FATCA Letter is a communication from your foreign bank to you in order to obtain the information that the foreign bank is required to disclose to the IRS under the Foreign Account Tax Compliance Act (FATCA). The basic purpose of a FATCA Letter is to confirm whether you are a U.S. person. Once this information is confirmed, your foreign bank will disclose to the IRS all of the FATCA-required information, including the account numbers and balances of your foreign account.

Your FATCA Letter will usually arrive with the enclosed Forms W-9 and W-8BEN. Form W-9 usually pertains to U.S. citizens, while the Form W-8BEN is usually reserved for nonresident aliens (for U.S. tax purposes).

What Should I Do if I Received a FATCA Letter and I Have Not Reported My Foreign Accounts to the IRS?

Now that you know what a FATCA Letter is, it is important to consider what you should do when you receive one from your foreign bank.

The first thing is to understand what not to do – you should NOT ignore a FATCA Letter. You now know what a FATCA Letter is and you understand that it is used by the bank to comply with FATCA. Hence, if you ignore your FATCA Letter, the bank must do something to explain to the IRS why it could not comply with its reporting obligations. This “something” is likely to get you in trouble, because not only can your bank close your bank account (depending on the FATCA treaty), but your foreign bank will also report you as a “recalcitrant” taxpayer to the IRS together with the account number and the balance. This will likely lead to a later IRS examination which may prevent you from doing any type of a voluntary disclosure and subject you to draconian FBAR penalties.

Rather, with the understanding of the FATCA Letter, your plan of action should be as follows:

1. Understand the deadline by which you should respond to your FATCA letter and see if you have sufficient time to contact an international tax law firm (such as Sherayzen Law Office) prior to the deadline. If you do not have enough time, contact the bank and ask them for more time due to your need to seek legal advice – 30 to 45 days is usually considered reasonable.

However, try to avoid sending any information to the bank if possible without going through step #2 first. I have seen on the internet suggestions from some attorneys to immediately send to the bank Form W-9 before you consult an attorney; usually, such haste is premature and ill-advised. You need to know your legal position first.

2. Schedule a consultation with an international tax law firm immediately after you receive your FATCA Letter – Sherayzen Law Office would naturally be the best choice as the firm that specializes in dealing with FATCA letters.

3. Prepare as many documents and bank records as you can prior to the consultation. Now that you know about the FATCA Letter, you understand that it will involve your entire tax situation. Ask Attorney Eugene Sherayzen for a list of items needed to be supplied prior to the consultation.

4. Go through with the consultation. The consultation is not going to focus just on the FATCA Letter and how it impacts your case; rather, the majority of the consultation will be centered around the discussion of your legal position, your current tax reporting requirements and your voluntary disclosure options.

5. Retain an international tax law firm to do your voluntary disclosure. Again, my suggestion is to retain Sherayzen Law Office, because this is a firm that specializes in the voluntary disclosures and international tax compliance involving FATCA, FBAR, foreign trusts, foreign inheritance, foreign business ownership, and other IRS requirements that may be applicable to you.