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NPB Neue Privat Bank Signs Non-Prosecution Agreement | OVDP Lawyer

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On July 18, 2018, the US Department of Justice (the “DOJ”) announced that it signed a Non-Prosecution Agreement with NPB Neue Privat Bank AG (“NPB”). Let’s explore in more detail the history of this case and its resolution.

Background Information: 2001 QI Agreement between NPB and the IRS

NPB is a Swiss private bank based in Zurich. In 2001, NPB entered into a Qualified Intermediary Agreement (“QI Agreement”) with the IRS, which had extensive requirements for US tax withholding and US information reporting. Among these requirements was the obligation for NPB to ask its new and existing US clients to complete IRS Forms W-9 if they engaged in US securities transactions. In such cases, NPB was required to report the relevant transactions on IRS Form 1099.

Based on the QI Agreement, NPB arrived at a paradoxical conclusion that became prevalent among Swiss banks in the early 2000s. It believed that, as long as the bank complied with its QI Agreement, it could continue to accept and service US taxpayers even if NPB knew or had reason to believe that these taxpayers engaged in tax evasion. In other words, the bank could service such clients as long as they were not trading US-based securities or the investment accounts were nominally structured in the name of a foreign-based entity. It does not appear that an opinion of a legal counsel was secured in support for this belief.

Background Information 2009: NPB Accepts Noncompliant US Taxpayers

Prior to 2009, NPB had relatively few US clients; in fact, at the close of 2008, all of the NPB accounts owned by its US clients held approximately 8 million Swiss francs in assets.

The situation changed dramatically in 2009. As a result of the UBS case and other signs of increased IRS activity with respect to undisclosed foreign accounts, major Swiss banks started closing accounts owned by US taxpayers, creating a flood of potential clients for NPB. In early 2009, certain external-asset managers asked the bank to give refuge to these taxpayers and their money. The managers told the bank that they asked their US clients to become tax compliant, but some of them still had not done so.

On March 9, 2009, the NPB’s board of directors unanimously voted to allow US taxpayers to open accounts with the bank, even for those clients who fled other Swiss banks. As a result, by the end of 2009, NPB accumulated close to 450 million Swiss francs in accounts owned or beneficially owned by US taxpayers. The DOJ estimated that only 69% of these assets were reported to the US government at that time.

It appears that the bank’s executives had hoped that their US clients would eventually come into full compliance with US tax laws, but no written or formal policy to encourage or mandate such compliance was ever created.

Years 2010-2012: NPB Stops Accepting US Clients and Implements Some Procedures to Encourage US Tax Compliance

In August of 2010, as a result of the fact that US tax enforcement made the environment for Swiss banks which accepted noncompliant US taxpayers more and more dangerous, NPB decided not to open any new accounts for US clients who were noncompliant with US tax laws.

This decision (which was not reduced to writing) did not stop the bank from continuing to service its already existing noncompliant US taxpayers. Moreover there were at least 89 US-related accounts, both declared and undeclared, held in the name of offshore structures, such as trusts or corporations. These offshore structures were domiciled in countries such as Panama, Liechtenstein, the British Virgin Islands, Hong Kong, and Belize. All of these structures, however, were set up before the clients were accepted by the bank.

Starting August of 2010, NPB finally started to require new US clients to provide Forms W-9. The existing clients were required to submit Form W-9 only starting in the summer of 2011. The bank started to require evidence of tax compliance from its external asset managers only in August of 2011.

Swiss Bank Program: NPB is a Category 1 Bank

On August 29, 2013, the DOJ announced the Swiss Bank Program, but it declared NPB as a Category 1 bank ineligible to participate in the Program. By that time, the DOJ already started its investigation of the bank and its activities with respect to noncompliant US taxpayers.

Non-Prosecution Agreement with the DOJ

NPB cooperated throughout the DOJ investigation. In fact, the bank turned over the identities of US account holders and beneficial owners of more than 88% of the US-held assets.

The parties finally reached the agreement on July 18, 2018, when they signed the Non-Prosecution Agreement. Under the Agreement, the DOJ promised not to prosecute NPB. In return, the bank agreed to pay a penalty of $5 million. The bank further agreed to cooperate in any related criminal or civil proceedings as well as demonstrate that it implemented the necessary procedure to stop misconduct involving undeclared US-related accounts.

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

The NPB-DOJ Non-Prosecution Agreement demonstrates the continued IRS focus on US international tax enforcement. The IRS has devoted considerable resources to this area and all noncompliant US taxpayers around the world are at a significant risk of discovery, not just taxpayers with undisclosed Swiss bank accounts.

If you have undisclosed foreign accounts, contact Sherayzen Law Office as soon as possible to explore your voluntary disclosure options. Time is of the essence: the IRS flagship Offshore Voluntary Disclosure Program (“OVDP”) will close on September 28, 2018.

Contact Us Today to Schedule Your Confidential Consultation!

IRS Prioritizes Combating Offshore Tax Cheating | Offshore Tax Lawyer

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On March 20, 2018, the IRS announced that offshore tax cheating – i.e. hiding money and other assets in unreported foreign accounts – remains on the IRS “Dirty Dozen” tax scams for the year 2018.

Offshore Tax Cheating: What is the “Dirty Dozen” List?

The IRS uses the “Dirty Dozen” list to describe various scams that a taxpayer may encounter and which form the focus of the IRS enforcement efforts. Some of these schemes peak during the tax filing season.

Illegal scams can lead to significant penalties and even possible criminal prosecution. The IRS Criminal Investigation Division works closely with the Department of Justice to shut down scams and prosecute the criminals behind them.

What is Offshore Tax Cheating?

In its most basic form, offshore tax cheating is a long-running scheme that uses foreign accounts to hide money in order to avoid paying US taxes. The taxpayers then use debit cards, credit cards or wire transfers to access the hidden accounts. More complex schemes include the usage of foreign corporations, foreign trusts, employee-leasing schemes, private annuities, insurance plans and other third-parties to conceal the real US owner of foreign accounts.

The most modern offshore tax cheating scheme has involved cryptocurrencies traded overseas and exchanged into a foreign currency by using an offshore account. The IRS has already begun addressing tax evasion based on virtual currencies, but we have not yet seen a fully-developed IRS enforcement in this area.

Offshore Tax Cheating is the Long-Standing Focus of the IRS

The IRS warns that taxpayers should be wary of these schemes, especially given the continuing focus on this issue by the IRS and the Justice Department.

In fact, since mid-2000s, offshore tax cheating has been one of the primary targets of the IRS. The IRS already conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Every investigation yields important information that is used to learn about noncompliance patterns and commence other investigations. Some of these investigations may focus on bankers and financial advisors who helped set up a scheme that led to offshore tax cheating.

Offshore Voluntary Disclosure as a Way to Settle Prior Tax Noncompliance

If a taxpayer participated in scheme that the IRS may characterize as offshore tax cheating, he should consider doing a voluntary disclosure as soon as possible. It is very likely that the IRS will consider tax noncompliance associated with such a scheme as willful. Hence, the Offshore Voluntary Disclosure Program (“OVDP”) may be the primary choice for such taxpayers.

In fact, according to the IRS, more than 56,400 disclosures were made through various versions of OVDP since 2009. The IRS collected more than $11.1 billion from the OVDP during that time period.

Additionally, more than 65,000 taxpayers who claimed that they were non-willful in their prior tax noncompliance participated in the Streamlined Compliance Procedures. As I stated above, however, a taxpayer should be very careful about participating in the Streamlined Compliance Procedures if he participated in a scheme that the IRS may classify as offshore tax cheating.

OVDP Will Close on September 28, 2018

Taxpayers who wish to participate in the OVDP should consult Sherayzen Law Office as soon possible. The IRS recently announced that the OVDP will close on September 28, 2018.

Contact Sherayzen Law Office if You Wish to do an Offshore Voluntary Disclosure That Involves a Scheme Classified as Offshore Tax Cheating

If you participated in a scheme that the IRS may classify as offshore tax cheating, you should contact Sherayzen Law Office to explore your voluntary disclosure options as soon as possible.

Sherayzen Law Office is a leading international tax law firm that specializes in offshore voluntary disclosures, including OVDP (closed) and Streamlined Compliance Procedures. We have helped hundreds of US taxpayers around the world to bring their US tax affairs into full compliance with US tax laws, and We Can Help You!

Contact Us Today to Schedule Your Confidential Consultation!

2014 IRS OVDP Future is Uncertain Due to Recent TIGTA Report

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Recently, there have been signs that the IRS is pondering the future of its flagship Offshore Voluntary Disclosure Program (2014 IRS OVDP): does this means that there is a potential for the 2014 IRS OVDP to end soon?

TIGTA Report and 2014 IRS OVDP

The latest warning signal came on June 2, 2016. On that date, the Treasury Inspector General for Tax Administration (TIGTA) issued a report with six recommendations with respect to the current IRS Offshore Voluntary Disclosure Program (2014 IRS OVDP). The report contained the following enigmatic language: “Although the IRS agreed with the potential value of establishing one mailing address for taxpayer correspondence, this recommendation has been put on hold until a decision is made about the future status of the OVDP.” (Italics added) Furthermore, on page 15 of the report, the IRS again emphasizes the non-permanent nature of the 2014 IRS OVDP and refuses to commit additional resources to one of TIGTA’s recommendations.

2014 IRS OVDP Future is Uncertain

The language contained in TIGTA report should definitely be treated seriously. At the very least, we now have an official, though indirect confirmation that the IRS is thinking about modifying the 2014 IRS OVDP and potentially, the Streamlined Compliance procedures.

Is there a potential for the IRS to cancel the entire 2014 IRS OVDP? It is definitely possible; the IRS has always insisted that 2014 IRS OVDP exists simply as a voluntary IRS initiative that can be terminated at any point. Furthermore, there are signs of significant administrative issues with respect to the 2014 IRS OVDP with significant delays in case resolutions. The IRS budget constrains may simply no longer permit the IRS to sustain 2014 IRS OVDP, despite the funds that this program has brought to the U.S. Treasury.

It is also probable that the success of the Streamlined Compliance procedures, FATCA and the Swiss Bank Program may now allow the IRS to focus on prosecuting willful taxpayers, making the 2014 IRS OVDP superfluous. Of course, this would mean that non-compliant willful U.S. taxpayers would not have any official voluntary disclosure program that would accept them.  Drawing on the experience of prior periods of time between the voluntary disclosure programs, most likely, the absence of an OVDP is likely to force such taxpayers to either try to bury deeper their tax noncompliance or, if they wish to come forward, to negotiate with the IRS directly through the traditional voluntary disclosure program.  If the latter if the case, such a taxpayer will be negotiating with the IRS without any guarantees of a reduced penalty.

Another likely possibility is a significant modification of the terms of the 2014 IRS OVDP (which, itself is just a modification of the official 2012 OVDP). The change in terms could affect anything from penalty rates to procedural changes. For example, it is possible that, under the new program, the default penalty rate would rise to 50% from the current 27.5% and the high penalty rate would go above the current 50%.

U.S. Taxpayers with Undisclosed Foreign Accounts Should Consider 2014 IRS OVDP As Soon As Possible

The TIGTA Report and the great uncertainty surrounding the future of the current 2014 IRS OVDP program directly affect U.S. taxpayers with undisclosed foreign accounts. If 2014 IRS OVDP is significantly altered or even disappears entirely, U.S. taxpayers will lose one of the main voluntary disclosure venues and the only one opened to taxpayers who willfully violated U.S. tax laws.

This is why U.S. taxpayers with undeclared foreign accounts should consider their voluntary disclosure options, including participation in the 2014 IRS OVDP, as soon as possible. In order to properly initiate their voluntary disclosure process, these taxpayers should retain the services of an experienced international tax attorney.

Contact Sherayzen Law Office for Experienced and Professional Legal Help

If you have undeclared foreign accounts, please contact Sherayzen Law Office as soon as possible. Our experienced legal team of tax professionals will thoroughly analyze your case, determine your available offshore voluntary disclosure options, create your voluntary disclosure plan and implement it (including the preparation of all tax forms and legal documents).

Contact Us Today to Schedule Your Confidential Consultation!