The Department of Justice recently imposed another $5.3 million penalty on Bank Lombard Odier & Co., Ltd., a Swiss bank that has already paid over $99 million for offering offshore banking services to U.S. taxpayers without disclosing their transactions. Since Bank Lombard signed its first non-prosecution agreement in 2015, it has acquired 88 additional accounts, again without disclosing them as required.
The IRS Large Business and International division (LB&I) is rolling out a series of campaigns focused on specific compliance issues. The division analyzed extensive data as well as suggestions from IRS compliance employees and the tax community to improve large business compliance activities.
On June 1, 2017, U.S. Ambassador Margaret Ann Uyehara and Montenegrin Finance Minister Darko Radunovic signed an Intergovernmental Agreement (IGA) to combat offshore tax evasion by implementing the provisions of the Foreign Account Tax Compliance Act (FATCA). Banks from Montenegro will be able to share information about financial accounts of U.S. citizens with the IRS.
The Internal Revenue Service (IRS) may begin ramping up its investigation of offshore account compliance soon, based on recommendations from the Treasury Inspector General for Tax Administration (TIGTA). TIGTA recently released its final report on the IRS' offshore voluntary disclosure programs (OVDPs) after analyzing a stratified random sample of 100 taxpayers from a population of 3,182 requests to participate in the OVDP that were ultimately denied or withdrawn. Twenty-nine of these should likely have been subject to FBAR penalties, but the IRS did not pursue compliance actions. TIGTA projected a potential $21.6 million in delinquent FBAR penalties that the IRS could have assessed and collected.
If you have offshore assets that are not yet properly disclosed, you should consider contacting an attorney immediately for assistance, before a civil or criminal investigation begins. On April 3, 2016, the International Consortium of Investigative Journalists (ICIJ), with the help of German newspaper Süddeutsche Zeitung, revealed approximately 11.5 million documents on 214,000 shell companies that operated between the 1970s and 2016, causing extreme embarrassment and panic for many of the world's leading figures. Although shell companies are not illegal to own, using them to avoid paying your taxes is.
Individuals and businesses often take advantage of the benefits offshore banking provides. You may have opened an account to ensure that you get to keep more of your hard-earned money with a favorable tax rate. You may have used a trust or foundation to protect your assets.
The U.S. Department of the Treasury has announced that the United States has signed an intergovernmental agreement (IGA) with France to implement the Foreign Account Tax Compliance Act (FATCA). Enacted in 2010, FATCA aims to curtail offshore tax evasion by facilitating the exchange of tax information.
Although the IRS won't comment on the reason Bank Leumi customers were kicked out of the IRS' Offshore Voluntary Disclosure Program (OVDP) after not only being accepted into the program, but after some had already received a final clearance and paid the amounts due to the IRS, it is suspected that the IRS admitted the taxpayers into the program in error. If a taxpayer is already under audit or investigation, he won't be admitted into OVDP. Once admitted, a taxpayer can be removed if he does not cooperate with the government or makes false statements with regard to the disclosure. Since some of these taxpayers were readmitted, it is likely they were originally admitted in error. Regardless, the right result was reached with this reversal if the IRS wants taxpayers to continue to come forward and disclose offshore accounts.