The Tax Times: OVDP Penalty Increased To 50% For 48 Foreign Banks!

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators.

The complete list is as follows, as of 9/16/15:

UBS AG (effective 8/4/14)
Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd. (effective 8/4/14)
Wegelin & Co. (effective 8/4/14)
Liechtensteinische Landesbank AG (effective 8/4/14)
Zurcher Kantonalbank (effective 8/4/14)
swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG (effective 8/4/14)
CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates (effective 8/4/14)
Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd. (effective 8/4/14)
The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India) (effective 8/4/14)
The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates (effective 8/4/14)
Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
Bank Leumi le-Israel B.M., the Bank Leumi le-Israel Trust Compay Ltd., Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
BSI SA (effective 3/30/15)
Vadian Bank AG (effective 5/8/15)
Finter Bank Zurich AG (effective 5/15/15)
Societe Generale Private Banking (Lugano-Svizzera) SA (effective 5/28/15)
MediBank AG (effective 5/28/15)
LBBW (Schweiz) AG (effective 5/28/15)
Scobag Privatbank AG (effective 5/28/15)
Rothschild Bank AG (effective 6/3/15)
Banca Credinvest SA (effective 6/3/15)
Societe Generale Private Banking (Suisse) SA (effective 6/9/15)
Berner Kantonalbank AG (effective 6/9/15)
Bank Linth LLB AG (effective 6/19/15)
Bank Sparhafen Zurich AG (effective 6/19/15)
Ersparniskasse Schaffhausen AG (effective 6/26/15)
Privatbank Von Graffenried AG (effective 7/2/15)
Banque Pasche SA (effective 7/9/15)
ARVEST Privatbank AG (effective 7/9/15)
Mercantil Bank (Schweiz) AG (effective 7/16/15)
Banque Cantonale Neuchateloise (effective 7/16/15)
Nidwaldner Kantonalbank (effective 7/16/15)
SB Saanen Bank AG (effective 7/23/15)
Privatbank Bellerive AG (effective 7/23/15)
PKB Privatbank AG (effective 7/30/15)
Falcon Private Bank AG (effective 7/30/15)
Credito Privato Commerciale in liquidazione SA (effective 7/30/15)
Bank EKI Genossenschaft (effective 8/3/15)
Privatbank Reichmuth & Co. (effective 8/6/15)
Banque Cantonale du Jura SA (effective 8/6/15)
Banca Intermobiliare di Investimenti e Gestioni (Suisse) SA (effective 8/6/15)
bank zweiplus ag (effective 8/20/15)
Banca dello Stato del Cantone Ticino (effective 8/20/15)
Hypothekarbank Lenzburg AG (effective 8/27/15)
Schroder & Co. Bank AG (effective 9/3/15)
Valiant Bank AG (effective 9/10/15)
Bank La Roche & Co AG (effective 9/15/15)
Belize Bank International Limited, Belize Bank Limited, Belize Corporate Services Limited, their predecessors, subsidiaries, and affiliates (effective 9/16/15)

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.

In accordance with the terms of the Swiss Bank Program, each bank mitigated its penalty by encouraging U.S. account holders to come into compliance with their U.S. tax and disclosure obligations. While U.S. account holders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.

Under the program, banks are required to:

Make a complete disclosure of their cross-border activities;

Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;

Cooperate in treaty requests for account information;

Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed (a/k/a Levers List);

Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and

Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement.

“With each Additional Agreement,
the world where criminals can hide their money
is becoming smaller and smaller. Those who circumvent offshore disclosure laws have little room to hide.”said Chief Richard Weber of IRS-Criminal Investigation.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation.

Taxpayers who had undeclared income from one of these 48 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 48 Banks Delivering Names to the IRS?