Finter Bank Zurich AG Reaches Resolution with US DOJ

On May 15, 2015, Finter Bank Zurich AG (Finter Bank) became the third Swiss bank to sign a Non-Prosecution Agreement with US DOJ according to the terms of the DOJ Program for Swiss Banks.

DOJ Program for Swiss Banks

On August 29, 2013, the DOJ announced the creation of the “The Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks (Program)” with the goal or creating a voluntary disclosure program for Swiss banks. Under the Program, the Swiss banks would prove DOJ with detailed description of specified activities with respect to US-owned accounts as well as the identification of all accounts held by US persons at any point since August of 2008. In exchange, the Program promised Swiss banks an opportunity to forever resolve their past US non-compliance issues (including criminal illegal activities) with respect to US-held accounts. For Category 2 banks, the Program also imposed various penalty requirements. The banks already under criminal investigation related to their Swiss-banking activities and all individuals were expressly excluded from the program.

Finter Bank timely entered the Program and payed the required penalties. This is why it became the third Swiss bank to resolve its issues under the Program.

Finter Bank Background

Finter Bank was founded in 1958 in Chiasso, Switzerland, and has a branch office in Lugano, Switzerland. Since August 1, 2008, Finter Bank has maintained 283 U.S.-related accounts with an aggregate maximum balance of approximately $235 million.

Since its establishment and continuing through at least October 2011, Finter Bank, through its managers, employees and others, aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and concealing the assets and income they held in these accounts from the Internal Revenue Service (IRS). After August 2008, when Swiss bank UBS AG publicly announced that it was the target of a criminal investigation by U.S. tax authorities, Finter Bank accepted accounts from U.S. persons exiting other Swiss banks.

Finter Bank provided services that allowed U.S. clients to eliminate the paper trail associated with the undeclared assets and income, including “hold mail” services and numbered and coded accounts. In addition, Finter Bank assisted clients in using sham entities as nominee beneficial owners of undeclared accounts, solicited Forms W-8BEN that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts, and provided cash cards and credits cards linked to the undeclared accounts.

Finter Bank Non-Prosecution Agreement

According to the terms of the non-prosecution agreement signed on May 15, Finter Bank agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay a $5.414 million penalty in return for the department’s agreement not to prosecute Finter Bank for tax-related criminal offenses.

Consequences of Finter Bank Non-Prosecution Agreement for US Taxpayers

In resolving its criminal liabilities under the program, Finter Bank encouraged U.S. accountholders to come into tax compliance and participate in the IRS Offshore Voluntary Disclosure Program. However, the taxpayers who did not listen to Finter Bank’s pleas and have not disclosed their secret Swiss accounts now face an importance consequence as a result of Finter Bank Non-Prosecution Agreement – if these taxpayers wish to enter the OVDP now, the penalty percentage has increased from 27.5 percent to 50% of the highest balance of their accounts for the past eight years.

Contact Sherayzen Law Office for Help With Disclosure of Your Foreign Bank Accounts

If you have undisclosed foreign bank accounts and any other assets, you should contact Sherayzen Law Office for professional help as soon as possible. Our legal team consists of tax professionals who specialize in offshore voluntary disclosures and have helped hundreds of US taxpayers around the world.

We can help You! Contact Us to Schedule Your Confidential Consultation Now!

FBAR Criminal Prosecution and Smaller Banks: The Case of Wegelin

On January 3, 2013, Wegelin & Co., the oldest Swiss private bank announced that it will close down following its guilty plea to criminal charges of conspiracy to help wealthy U.S. taxpayers evade taxes through secret financial accounts. The guilty plea and the closure of one of the most prestigious European banks that served its clients since the year 1741 constitute big victories for the U.S. authorities. It surely will inspire additional movement of non-compliant U.S. taxpayers into the 2012 OVDP (Offshore Voluntary Disclosure Program) as well as ensure more widespread compliance with the FBAR, Form 8938 and other numerous international tax forms required by the IRS.

However, in addition to its significance to U.S. tax compliance, the Wegelin case also has other interesting features that may point to future trends in the IRS international tax enforcement. In this article, I will outline these trends and explore their potential implications for U.S. tax enforcement.

Jurisdiction to Prosecute Foreign Banks: Minimal Contact Will Suffice

In order to criminally charge a foreign bank, U.S. tax authorities need to establish some connection between the United States and the foreign bank. It appears that after the Wegelin case, proving U.S. exposure will not a be a significant problem for the IRS.

The main reason for Wegelin’s bold defiant behavior (Wegelin specifically advertised itself as a safe, tax-free alternative to U.S. taxpayers who were fleeing UBS after criminal prosecution charges were filed against UBS in 2008) was its deep belief that it cannot be criminally prosecuted in the United States because U.S. tax authorities have no jurisdiction over it. Unlike UBS, Wegelin had virtually no physical presence in the United States, no operating divisions and no branch offices in the United States.

However, Wegelin miscalculated. The IRS discovered that Wegelin did have presence in the United States because it “directly accessed” the U.S. banking system through a correspondent account that it held at UBS AG (“UBS”) in Stamford, Connecticut. The Justice Department successfully argued that this one correspondent account was sufficient to give the United States government the jurisdiction to criminally charge Wegelin.

Hence, one of the biggest consequences of the Wegelin case is that it will not be difficult for the U.S. tax authorities to establish jurisdiction to criminally charge foreign banks even with very insignificant presence in the United States.

Size Matters: Increased Risk for Smaller Banks

The other important lesson of the Wegelin case is that it appears that the IRS is more likely to aggressively pursue smaller banks than the bigger banks the demise of which can cause systemic instability in the world economy.

The collapse of Wegelin stands in stark contrast to the survival of its bigger Swiss rival, UBS. UBS offered pretty much the same services to U.S. taxpayers as Wegelin involving vastly larger number of U.S. persons and amounts of money (at the very least, 20 billion dollars versus Wegelin’s 1.2 billion dollars). The IRS did file criminal charges against UBS, but UBS entered into a deferred prosecution agreement and charges were dropped eighteen months later.

It could be that some of the aggressiveness of the U.S. government came precisely from Wegelin’s defiant stance. In order to reinforce its recent victory in the UBS case, the IRS had to adopt a more assertive stand. However, it did not necessarily have to end in Wegelin’s demise.

Some commentators argued that Wegelin was already a shadow of its former self at the time of its closure, because it aggressively sold-off all of its non-US related assets. Therefore, it may be argued that it is premature to draw general conclusions from the Wegelin’s case about the risks facing small foreign banks who find themselves indicted by the U.S. government. On the other hand, the very fact that Wegelin decided that it would be better for the bank to sell off its assets rather than fight the IRS and the fact that the U.S. government was not concerned about this decision do point to a conclusion that the Wegelin case may be demonstrative of the general vulnerability of smaller banks in such situations.

Unresolved Issues: Client Information and Sold-Off Practice

One of the most important issues, however, is still unresolved in the Wegelin case and makes it worthwhile to observe to its end. The issue is: will the bank disclose the names of its U.S. clients to the IRS?

Typically, disclosure of the names of U.S. taxpayers constitutes a key request by the IRS in such major investigations. Therefore, it does not seem likely that the IRS will simply leave this issue without at least attempting to obtain the names of non-compliant U.S. taxpayers as part of the final deal.

The other unresolved issue is whether a strategy similar to Wegelin’s sale of its non-US accounts to the Austrian Bank Raiffeisen just before the indictment is going to challenged by the IRS if the sale does involve U.S. clients and maybe even if it does not (especially where the bank is left without any assets). It is not known if we are going to get an answer at this time, but it is likely that this issue will show up again in a future case.

Contact Sherayzen Law Office for Help With Voluntary Disclosure of Foreign Financial Accounts

If you have undisclosed offshore accounts (whether in the hard-hit Switzerland or any other country) , you should contact Sherayzen Law Office as soon as possible to explore the voluntary disclosure options available in your case. Our experienced voluntary disclosure firm will thoroughly review your case, explore available options, propose a definite plan for moving forward, prepare all of the necessary legal documents and tax forms, and guide you though the entire case while rigorously representing your interests in your negotiations with the IRS.

FBAR Extension for Certain Individuals: FinCEN Notices 2011-1 and 2011-2

On May 31, 2011, and June 17, 2011, in FinCEN Notices 2011-1 and 2011-2, the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) announced that a small subset of individuals, who are required to file the Report of Foreign Bank and Financial Accounts (FBAR), will receive a one-year extension beyond the recent filing date of June 30, 2011.

FinCEN Notices 2011-1 and 2011-2 concern only individuals with signature authority and apply to the following narrow categories of filers:

1). An employee or officer of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of another entity more than 50 percent owned, directly or indirectly, by the entity (a “controlled person”).
2). An employee or officer of a controlled person of a covered entity (see 31 C.F.R. § 1010.350(f)(2)(i)-(v)) who has signature or other authority over and no financial interest in a foreign financial account of the entity or another controlled person of the entity.
3). An employee or officer of an investment advisor registered with the Securities and Exchange Commission who has signature or other authority over and no financial interest in a foreign financial account of persons that are not investment companies registered under the Investment Company Act of 1940.

Notice that categories 1 and 2 do not apply to companies that are not publicly traded or not SEC-registrants.

The new extended filing deadline for the categories of individuals above is June 30, 2012. The deadline applies to FBARs for 2010, 2009 and earlier years.

Unless another relief notice applies, all other U.S. persons required to file an FBAR this year are required to meet the June 30, 2011 filing date. Unlike with federal income tax returns, extensions of time to file are not available.

Contact Sherayzen Law Office for FBAR Guidance

If you have any questions with respect to FinCEN Notices 2011-1 and 2011-2 or if you are looking for FBAR guidance, contact Sherayzen Law Office NOW! Eugene Sherayzen an experienced tax attorney will explain to you the current FBAR requirements and devise the appropriate FBAR compliance strategy for you.

Gold Bullion Foreign Accounts and FBAR

A frequent question in my practice is whether a foreign account holding gold bullion is required to be reported on FinCEN Form 114 formerly Form TD F 90-22.1, usually referred to as “FBAR” (Report on Foreign Bank and Financial Accounts).

FBAR is required to be filed by any U.S. person who has a financial interest in or signature authority or other authority over any financial account in a foreign country, if the aggregate value of these accounts exceeds $10,000 at any time during the calendar year. FBAR is due April 15th or October 15th (for the previous calendar year). There is an automatic extension if the FBAR is not filed by the April 15th deadline, unlike Federal and some State returns that must be filed by extension. For federal returns the extension is Form 4868. The FBAR rules are enforced by the Internal Revenue Service.  You can read more about the general FBAR requirements here.

Whether gold buillion is required to be reported on the FBAR involves a general issue of whether FBAR definition of “financial account” covers foreign accounts that hold only non-monetary assets.  The answer is yes – an account with a financial institution that is located in a foreign country is a financial account for FBAR purposes whether the account holds cash or non-monetary assets.

Therefore, most taxpayers must reports foreign accounts that hold gold bullion on the FBAR.

Contact Sherayzen Law Office For FBAR Help

If you have any questions with respect to FBARs or you just found out that you should have filed the FBARs for the past years and you wish to go through a voluntary disclosure, contact Sherayzen Law Office as soon as possible.  Our experienced international tax firm can help you deal with any FBAR-related issues.

Remember, it does not matter whether you are located in another state or outside of the United States – we can help!

Official Treasury Currency Conversion Rates of December 31, 2010

Every quarter the U.S. Department of Treasury publishes its official currency conversion rates (they are called “Treasury’s Financial Management Service rates). While there are many uses for these rates, the current (March 2011 revision) FBAR instructions require their use, if available, to determine the maximum value of a foreign bank account. In particular, the FBAR instructions state:

In the case of non-United States currency, convert the maximum account value for each account into United States dollars. Convert foreign currency by using the Treasury’s Financial Management Service rate (this rate may be found at from the last day of the calendar year. If no Treasury Financial Management Service rate is available, use another verifiable exchange rate and provide the source of that rate. In valuing currency of a country that uses multiple exchange rates, use the rate that would apply if the currency in the account were converted into United States dollars on the last day of the calendar year.

Here is the table of the official Treasury currency conversion rates:

Country Currency Foreign Currency to $1.00
Afghanistan Afghani 44.5000
Albania Lek 106.3600
Algeria Dinar 73.1500
Angola Kwanza 90.0000
Antigua-Barbuda East Caribbean Dollar 2.7000
Argentina Peso 3.9800
Armenia Dram 360.0000
Australia Dollar 1.0400
Austria Euro 0.7700
Azerbaijan Manat 0.8200
Bahamas Dollar 1.0000
Bahrain Dinar 0.3800
Bangladesh Taka 69.0000
Barbados Dollar 2.0200
Belarus Ruble 3010.0000
Belgium Euro 0.7700
Belize Dollar 2.0000
Benin CFA Franc 503.3000
Bermuda Dollar 1.0000
Bolivia Boliviano 6.9600
Bosnia-Hercegovina Marka 1.5000
Botwana Pula 6.7500
Brazil Real 1.7200
Brunei Dollar 1.3200
Bulgaria Lev 1.5000
Burkina Faso CFA Franc 503.3000
Burma Kyat 450.0000
Burundi Franc 1243.0000
Cambodia (Khmer) Riel 4239.0000
Cameroon CFA Franc 503.3000
Canada Dollar 1.0200
Cape Verde Escudo 81.6700
Cayman Islands Dollar 0.8200
Central African Republic CFA Franc 503.3000
Chad CFA Franc 503.3000
Chile Peso 486.7000
China Renminbi 6.6700
Colombia Peso 1920.0000
Comoros Franc 361.3500
Congo CFA Franc 503.3000
Costa Rica Colon 501.9500
Cote D’Ivoire CFA Franc 503.3000
Croatia Kuna 5.5900
Cuba Peso 0.9300
Cyprus Euro 0.7700
Czech Republic Koruna 18.6400
Democratic Republic of Congo Congolese Franc 900.0000
Denmark Krone 5.7200
Djibouti Franc 177.0000
Dominican Republic Peso 37.0500
East Timor Dili 1.0000
Ecuador Dolares 1.0000
Egypt Pound 5.7900
El Salvador Dolares 1.0000
Equatorial Guinea CFA Franc 503.3000
Eritrea Nakfa 15.0000
Estonia Kroon 12.0000
Ethiopia Birr 16.4900
Euro Zone EURO 0.7700
Fiji Dollar 1.8200
Finland Euro 0.7700
France Euro 0.7700
Gabon CFA Franc 503.3000
Gambia Dalasi 28.0000
Georgia Lari 1.7600
Germany FRG Euro 0.7700
Ghana Cedi 1.4500
Greece Euro 0.7700
Grenada East Carribean Dollar 2.7000
Guatemala Quentzel 8.0000
Guinea Franc 6078.0000
Guinea Bissau CFA Franc 503.3000
Guyana Dollar 201.0000
Haiti Gourde 38.5000
Honduras Lempira 18.9000
Hong Kong Dollar 7.7700
Hungary Forint 217.1200
Iceland Krona 117.0700
India Rupee 45.7000
Indonesia Rupiah 8900.0000
Iran Rial 8229.0000
Iraq Dinar 1166.5000
Ireland Euro 0.7700
Israel Shekel 3.6800
Italy Euro 0.7700
Jamaica Dollar 85.8000
Japan Yen 83.8300
Jordan Dinar 0.7100
Kazakhstan Tenge 147.5000
Kenya Shilling 80.9000
Korea Won 1160.1500
Kuwait Dinar 0.2800
Kyrgyzstan Som 46.8000
Laos Kip 8031.0000
Latvia Lats 0.5400
Lebanon Pound 1500.0000
Lesotho South African Rand 7.0700
Liberia Dollar 49.0000
Libya Dinar 1.2500
Lithuania Litas 2.6500
Luxembourg Euro 0.7700
Macao Mop 8.0000
Macedonia FYROM Denar 45.8000
Madagascar Aria 2010.6100
Malawi Kwacha 151.0000
Malaysia Ringgit 3.1700
Mali CFA Franc 503.3000
Malta Euro 0.7700
Marshall Islands Dollar 1.0000
Martinique Euro 0.7700
Mauritania Ouguiya 290.0000
Mauritius Rupee 30.3000
Mexico New Peso 12.5000
Micronesia Dollar 1.0000
Moldova Leu 12.1700
Mongolia Tugrik 1262.4500
Montenegro Euro 0.7700
Morocco Dirham 8.5000
Mozambique Metical 35.7100
Namibia Dollar 7.0700
Nepal Rupee 72.9500
Netherlands Euro 0.7700
Netherlands Antilles Guilder 1.7800
New Zealand Dollar 1.3400
Nicaragua Cordoba 21.7900
Niger CFA Franc 503.3000
Nigeria Naira 150.6000
Norway Krone 6.2000
Oman Rial 0.3900
Pakistan Rupee 85.7000
Palau Dollar 1.0000
Panama Balboa 1.0000
Papua New Guinea Kina 2.4800
Paraguay Guarani 4700.0000
Peru Inti 0.0000
Peru Nuevo Sol 2.8300
Philippines Peso 44.1000
Poland Zloty 3.1100
Portugal Euro 0.7700
Qatar Riyal 3.6400
Romania Leu 3.2900
Russia Ruble 31.4000
Rwanda Franc 592.0200
Sao Tome & Principe Dobras 18526.1191
Saudi Arabia Riyal 3.7500
Senegal CFA Franc 503.3000
Serbia Dinar 0.7700
Seychelles Rupee 12.1000
Sierra Leone Leone 4146.0000
Singapore Dollar 1.3200
Slovak Euro 0.7700
Slovenia Euro 0.7700
Solomon Islands Dollar 7.4000
South Africa Rand 7.0700
Spain Euro 0.7700
Sri Lanka Rupee 111.3500
St Lucia East Carribean Dollar 2.7000
Sudan Pound 2.3700
Suriname Guilder 2.8000
Swaziland Lilangeni 7.0700
Sweden Krona 7.0400
Switzerland Franc 1.0000
Syria Pound 46.4500
Taiwan Dollar 30.5000
Tajikistan Somoni 4.4000
Tanzania Shilling 1483.0000
Thailand Baht 30.1800
Togo CFA Franc 503.3000
Tonga Pa’anga 1.7700
Trinidad & Tobago Dollar 6.3200
Tunisia Dinar 1.4500
Turkey Lira 1.5100
Turkmenistan Manat 2.8400
Uganda Shilling 2313.0000
Ukraine Hryvnia 7.8900
United Arab Emirates Dirham 3.6700
United Kingdom Pound Sterling 0.6400
Uruguay New Peso 19.9000
Uzbekistan Som 1645.0000
Vanuatu Vatu 92.5900
Venezuela New Bolivar 2.6000
Vietnam Dong 19500.0000
Western Samoa Tala 2.2300
Yemen Rial 214.0000
Yugoslavia Dinar 0.7700
Zambia Kwacha 4925.0000
Zimbabwe Dollar 1.0000

1. Lesotho’s loti is pegged to South African Rand 1:1 basis
2. Macao is also spelled Macau: currency is Macanese pataka
3. Macedonia: due to the conflict over name with Greece, the official name if FYROM – former Yugoslav Republic of Macedonia.