The Tax Times: 97 Offshore Banks Are Turning Over Your Names To The IRS

The IRS keeps updating its list of foreign banks which are turning over the names of their US Account Holders, who are now 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.

On March 9, 2016 the Justice Department Announced that Cayman National Securities Ltd. (CNS) and Cayman National Trust Co. Ltd.(CNT) are the 96th & 97th Offshore Banks to reached a resolution under the department’s Offshore Bank Program.

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

From at least 2001 through 2011, CNS and CNT, which are both located in Grand Cayman and organized under the laws of the Cayman Islands, assisted certain U.S. taxpayers in evading their U.S. tax obligations to the IRS, and otherwise hiding accounts held at CNS and CNT from the IRS (hereinafter, “undeclared accounts”). CNS and CNT did so by knowingly opening and maintaining undeclared accounts for U.S. taxpayers at CNS and CNT. Specifically, and among other things, in furtherance of a scheme to help U.S. taxpayers hide assets from the IRS and evade taxes:

CNS and CNT opened, and/or encouraged many U.S. taxpayer-clients to open, accounts held in the name of sham Caymanian companies and trusts (collectively, “structures”), thereby helping U.S. taxpayers conceal their beneficial ownership of the accounts.
CNS and CNT treated these sham Caymanian structures as the account holders and allowed the U.S. beneficial owners of the accounts to trade in U.S. securities.
CNS failed to disclose to the IRS the identities of the U.S. beneficial owners who were trading in U.S. securities, in contravention of CNS’s obligations under its Qualified Intermediary Agreement (“QI”) with the IRS.
After learning about the investigation of Swiss bank UBS AG (“UBS”), in or about 2008, for assisting U.S. taxpayers to evade their U.S. tax obligations, CNS and CNT continued to knowingly maintain undeclared accounts for U.S. taxpayer-clients, and did not begin to engage in any significant remedial efforts with respect to those accounts until 2011 and 2012.

            The sham Caymanian structures that CNT set up for U.S. taxpayer-clients included trusts, which were nominally controlled by CNT trust officers, but which in fact were controlled by the U.S. taxpayer-clients; managed companies, for which CNT ostensibly provided direction and management services, but which in truth were shell companies that served only to hold the assets of the U.S. taxpayer-clients; and registered office companies, which were shell companies for which CNT simply supplied a Caymanian mailing address. CNS treated these sham Caymanian structures as the account holders and then permitted the U.S. taxpayer-clients to trade in U.S. securities, without requiring them to submit Form W-9s, which are IRS forms that identify individuals as U.S. taxpayers, as CNS was obligated to do under its QI obligations for accounts held by U.S. persons that held U.S. securities. CNS and CNT agreed to maintain these structures for U.S. taxpayer-clients after many of them expressed concern that their accounts would be detected by the IRS.

          At their high-water mark in 2009, CNS and CNT had approximately $137 million in assets under management relating to undeclared accounts held by U.S. taxpayer-clients. From 2001 through 2011, CNS and CNT earned over $3.4 million in gross revenues from the undeclared U.S. taxpayer accounts that they maintained.

         As part of their plea agreements, CNS and CNT have agreed to cooperate fully with the Office’s investigation of the companies’ criminal conduct.

To date, CNS and CNT have already made substantial efforts to cooperate with that investigation, including by:

facilitating interviews that the Office conducted of CNS and CNT employees, including top level executives;
voluntarily producing documents in response to the Office’s requests;
providing, in response to a treaty request, unredacted client files for approximately 20 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT; and
committing to assist in responding to a treaty request that is expected to result in the production of unredacted client files for approximately 90 to 95 percent of the U.S. taxpayer-clients who maintained accounts at CNS and CNT.

The complete list of Offshore Banks which are turning over the names of their US Account Holders, who are now subject to a 50% (rather than 27.5%) penalty in the IRS’s Offshore Voluntary Disclosure Program (OVDP)is as of 3/9/16:

UBS AG

Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.

Wegelin & Co.

Liechtensteinische Landesbank AG

Zurcher Kantonalbank

swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG

CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates

Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.

The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)

The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates

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 Company 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 10/6/15)

Schaffhauser Kantonalbank (effective 10/8/15)

BBVA Suiza S.A. (effective 10/16/15)

Piguet Galland & Cie SA (effective 10/23/15)

Luzerner Kantonalbank AG (effective 10/29/15)

Habib Bank AG Zurich (effective 10/29/15)

Banque Heritage SA (effective 10/29/15)

Hyposwiss Private Bank Genève S.A. (effective 10/29/15)

Banque Bonhôte & Cie SA (effective 11/3/15)

Banque Internationale a Luxembourg (Suisse) SA (effective 11/12/15)

Zuger Kantonalbank (effective 11/12/15)

Standard Chartered Bank (Switzerland) SA, en liquidation (effective 11/13/15)

Maerki Baumann & Co. AG (effective 11/17/15)

BNP Paribas (Suisse) SA (effective 11/19/15)

KBL (Switzerland) Ltd. (effective 11/19/15)

Bank CIC (Switzerland) Ltd. (effective 11/19/15)

Privatbank IHAG Zürich AG (effective 11/24/15)

Deutsche Bank (Suisse) SA (effective 11/24/15)

EFG Bank AG (effective 12/3/15)

EFG Bank European Financial Group SA, Geneva (effective 12/3/15)

Aargauische Kantonalbank (effective 12/8/15)

Cornèr Banca SA (effective 12/10/15)

Bank Coop AG (effective 12/10/15)

Crédit Agricole (Suisse) SA (effective 12/15/15)

Dreyfus Sons & Co Ltd, Banquiers (effective 12/15/15)

Baumann & Cie, Banquiers (effective 12/15/15)

Bordier & Cie Switzerland (effective 12/17/15)

PBZ Verwaltungs AG (effective 12/17/15)

PostFinance AG (effective 12/17/15)

Edmond de Rothschild (Suisse) SA (effective 12/18/15)

Edmond de Rothschild (Lugano) SA (effective 12/18/15)

Bank J. Safra Sarasin AG (effective 12/23/15)

Coutts & Co Ltd (effective 12/23/15)

Gonet & Cie (effective 12/23/15)

Banque Cantonal du Valais (effective 12/23/15)

Banque Cantonale Vaudoise (effective 12/23/15)

Bank Lombard Odier & Co Ltd (effective 12/31/15)

DZ Privatbank (Schweiz) AG (effective 12/31/15)

Union Bancaire Privée , USP SA (effective 1/6/16)

PHZ Privat - und Handelsbank Zürich AG reorganized as Leodan Privatbank AG (effective 1/25/16)

Hyposwiss Privatbank AG reorganized as HSZH Verwaltungs AG (effective 1/27/16)

Bank Julius Baer & Co., Ltd (effective 2/4/16)

Cayman National Securities Ltd. (effective 3/9/16)

Cayman National Trust Co. Ltd. (effective 3/9/16)

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, including taxpayers with accounts at one of the 97 Swiss Banks listed abover 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 97 Swiss banks taking the DOJ deal and
FATCA requiring the entire world to report to the IRS

it is inevitable that this increased disclosure, will result in Every American eventually being 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 one of

these Offshore Banks or

Management Companies?