Effective today, 47 new names have been added to the Internal Revenue Service’s ever-expanding list of “Foreign Financial Institutions or Facilitators” which trigger a significantly higher penalty for participants in the Offshore Voluntary Disclosure Program (OVDP). Under the current OVDP terms, individuals making a voluntary disclosure about offshore bank accounts and assets can avoid criminal prosecution by filing amended returns and FBARs and paying back taxes, interest, and penalties. The standard penalty applicable to OVDP participants is 27.5 percent of the highest aggregate value of undisclosed offshore assets during the eight-year lookback period. Taxpayers who maintained accounts, or were clients of, financial institutions or facilitators identified on the IRS list are subject to a substantially increased penalty calculated at 50 percent of the highest balance.
Since the OVDP terms were modified in 2014, the IRS has maintained a list of financial institutions and facilitators on its website that trigger the higher penalty. Initially, that list was compromised of a handful of foreign banks (mostly Swiss) which were the subject of U.S. government scrutiny, such as UBS, Credit Suisse, HSBC India, and Bank Leumi, among others. Over time that list grew steadily, as Swiss banks who participated in the DOJ’s Swiss Bank Program resolved their potential exposure for U.S. tax offenses and had their names added to the list. Eventually, the names of 78 Swiss banks were added to the list, and taxpayers who had accounts at any of those institutions became subject to the 50 percent penalty. Other banks were added to the list as a result of the issuance of “John Doe” summonses, including institutions in Belize and the Cayman Islands.
The 47 new names added to the list effective today consist of 40 individuals and 7 entities. The new additions include some familiar and well-known names, including UBS whistleblower Bradley Birkenfeld and Swiss financial advisor Beda Singenberger. A large number of Swiss bankers are among the newly-added individuals, including employees of UBS, Credit Suisse, Julius Baer, Wegelin, and smaller banks such as Zuercher Kantonalbank, Bank Frey, and Rahn & Bodner Banquiers. The list also includes a number of professional advisors, such as attorneys and asset managers from Switzerland and Liechtenstein, and includes individuals who assisted U.S. taxpayers in moving funds out of larger Swiss banks like UBS and Credit Suisse into smaller financial institutions (the so-called “leavers” that are the subject of great interest by the IRS and Justice Department). Today’s additions to the facilitator list are not limited to Switzerland, however; other countries implicated by the additions include the Cayman Islands, Turks & Caicos, and Belize. The seven companies added to the list are from Belize and were utilized as part of securities and tax fraud schemes orchestrated by a Belize-based individual named Robert Bandfield who has pleaded guilty to money laundering conspiracy in federal court in Brooklyn.
With the addition of these 47 new names, the total number of financial institutions and facilitators for which the 50 percent penalty applies is 144. The complete list can be found here.
Today’s action by the IRS confirms once again that U.S. taxpayers with undisclosed offshore accounts or assets should take immediate action. For taxpayers who still have not voluntarily corrected past misdeeds with respect to offshore assets, the window of opportunity for voluntary disclosures remains open but time is of the essence. Both the OVDP and the related “Streamlined Compliance Procedures” remain available to non-compliant taxpayers at this time, but only if the taxpayer initiates the voluntary disclosure process before the IRS receives information about a taxpayer’s non-compliance (such as through third-party disclosures mandated by FATCA or the Swiss Bank Program). Once the IRS learns of a taxpayer’s non-compliance, voluntary disclosure options are generally off the table. And, the IRS has said that it may terminate the OVDP and streamlined procedures at any time, without advance notice. Non-compliant taxpayers with offshore assets who fail to take immediate action now do so at their peril. This is especially so for taxpayers who had dealings with any of the institutions or individuals identified on the growing IRS facilitator list.