December 13, 2013
Federal Government Continues Assault Against Offshore Accounts
Two U.S. Federal Courts have approved the issuing of summonses to five U.S. banks regarding transfers made for two foreign banks. The first bank, Zuercher Kantonalbank (ZKB), is in Switzerland, where the Department of Justice has aggressively pursued banks that have assisted U.S. taxpayers in concealing assets from the U.S. government. The second bank, Bank of N.T. Butterfield & Son, is affiliated with the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland and the UK.
The summonses, referred to as “John Doe summonses”, require the banks to disclose information about U.S. taxpayer who may have used undisclosed offshore accounts to evade U.S. income taxes. The banks have indicated that they fully intend to comply with the summonses and cooperate with U.S. authorities.
In the past few years, the United States has ramped up its efforts to identify and prosecute those with undisclosed foreign accounts. Some foreign banks have even been criminally prosecuted in the United States, including Swiss bank Wegelin & Co. The case forced Wegelin, one of Switzerland’s oldest banks, to dissolve earlier this year. The chilling effect of these cases has caused many foreign banks to stop dealing with individuals who have U.S. ties altogether, out of fear. As the U.S. continues to sign tax treaties with foreign governments and pursue foreign banks, the places where U.S. taxpayers can hide assets offshore
In an effort to gather information about offshore accounts, while ensuring future compliance, the IRS rolled out its Offshore Voluntary Disclosure Initiative (OVDI) in 2009. The program allows individuals with undisclosed offshore accounts to voluntarily come forward and pay any additional taxes and civil penalties, in exchange for immunity from criminal prosecution. To date, tens of thousands of taxpayers have made voluntary disclosures. Due to the popularity of the program, the IRS has reopened the program on an indefinite basis. Since the program could be ended at any time without notice, taxpayers with undisclosed offshore accounts are encouraged to join the voluntary disclosure program as soon as possible.
We have assisted taxpayers throughout the U.S. and across the world in coming forward under the Offshore Voluntary Disclosure Program. To learn more about our international tax practice, please visit our website.