The Tax Times: The 1st Swiss Asset Management Firm To Turn Over Names of US Clients Over to the IRS!

On September 21, 2015 we posted "Oh Oh, We Are Half Way There ... 50 Swiss Banks Are Turning Over Their US Client's Names... Living on a Prayer?" where we discussed that the number of Swiss banks that have entered deferred prosecution agreements with the U.S. government keeps growing.

Now Finacor SA, a Swiss Asset Management Firm, has reached a resolution with the department through a non-prosecution agreement.

Finacor submitted a Letter of Intent to participate as a Category 2 bank in the department’s Swiss Bank Program.

Although it was ultimately determined that Finacor was not eligible for the Swiss Bank Program due to its structure largely as an asset management firm, the firm is required under today’s agreement to fully comply with the obligations imposed under the terms of that program. Under the terms of the agreement, Finacor is required to:

Make a complete disclosure of its 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 regarding other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
Agree to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations; and
Pay a penalty of $295,000.

Finacor agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Finacor for tax-related criminal offenses.

"The American Public can expect that we will

Use All of the Information ... to Vigorously Pursue Individual U.S. Taxpayers who Illegally Conceal Assets Offshore..."
said Chief Richard Weber of IRS-Criminal Investigation (CI).

Finacor opened asset management accounts in clients' names at custodial banks, including UBS AG, the DOJ said. The firm also held fiduciary accounts in its own name at custodian banks for customers, providing them another layer of anonymity, the department said. Finacor sent checks to the U.S. in amount below $10,000 in order to avoid reporting requirements and used code words for money transfers to conceal the repatriation of assets into the U.S., the DOJ said.

Since August of 2008, Finacor managed 11 U.S. accounts with total assets under management as high as $14.6 million, the DOJ said.

The IRS keeps updating its list of foreign banks where the holders of these offshore accounts are subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP). This penalty is based on the highest account balance measured over up to eight years.

The complete list is as follows, as of 10/1/15:

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)
St. Galler Kantonalbank AG (effective 9/17/15)
E. Gutzwiller & Cie, Banquiers (effective 9/17/15)
Migros Bank AG (effective 9/25/15)
Graubundner Katonalbank (effective 9/25/15)
BHF-Bank (Schweiz) AG (effective 10/1/15)
Finacor SA (effective 10/1/15)

Outside of these banks, the norm within the OVDP remains 27.5%. That is far better than prosecution or much bigger civil penalties. Some taxpayers can opt for the easier and less costly Streamlined program. This list does not impact the Streamlined programs because you must be non-willful to qualify. All of this is part of the June 2014 improvements to the OVDP, which sparked new interest in cleaning up offshore accounts.

With roughly 96 Swiss banks taking the DOJ deal and FATCA requiring the entire world to report to the IRS resulting in increasing disclosures, everyone American is eventually going to be discovered.

Banks worldwide want to know if there US clients are compliant with the IRS.

Within the OVDP, people who pre-cleared before the various effective dates are generally safe from the higher 50% penalty. As additional banks are added to the list, only those American taxpayers that request pre-clearance before their bank is listed, will get the 27 1/2% OVDP penalty. The 50% penalty now applies to all taxpayers with accounts at financial institutions or with facilitators which are named, are cooperating or are identified in a court filing such as a John Doe summons.

Although the 50% penalty is high, willful civil violations can result in tax, penalties and interest totaling 325% of the highest balance in the account for the most recent six years period. Recent guidance suggests that the IRS could be more lenient in the future, but the IRS’s definition of leniency can still make the OVDP a very good deal that provides certainty.

Do You Have Undeclared Income from a Swiss Bank or
Swiss Asset Management Company,

Who Is Handing Over Names to the IRS?