Put Another Notch in the DOJ Gun

In the history of the old west when gun fighters survived a gun fight they might put a “notch” in their pistol as a badge of honor. Well the U.S. Department of Justice can put another notch in its weapon of choice, threat of prosecution” because Deutsche Banks’ Swiss unit is reported to be the latest Swiss bank to enter into a non-prosecution agreement (NPA). The story was reported on October 9, 2014 by Reuters and read in part:

“Oct 9 (Reuters) – Deutsche Bank’s Swiss unit is working with U.S. officials as part of a crackdown on wealthy Americans evading taxes through hidden offshore accounts, a spokeswoman for the bank said on Thursday.”

The terms of the non-prosecution agreement were not fully disclosed, but the DOJ is apparently demanding full cooperation be the bank, its parent, affiliates and all related entities. The demand for full cooperation also extends to the 106 Swiss bank that have already entered into NPA’s. It is important to note that obligations under the NPA are wholly independent from obligation imposed under the Foreign Account Tax Compliance Act (FATCA). A bank can be FATCA compliant now and yet be subject to the terms and conditions of an NPA for past acts of assisting U.S. taxpayers in tax evasion and/or avoidance of account disclosure obligation under the Bank Secrecy Act (annual FBAR filing)

Any U.S. taxpayer who is an offshore account holder should act immediately to come forward and disclose all previously unreported offshore accounts or they will be in peril of bank disclosure. It does not matter that the taxpayer’s accounts are not in Switzerland for over 77,000 foreign financial institutions have entered into FATCA agreements with the IRS and over 80 foreign governments have entered into Inter-governmental agreements (mutual information exchange agreements) with the U.S. Your name and all important account data will be disclosed.

If you name and is reported before you come forward, expect to be treated as “willful”. If you are treated as “willful” you should expect possible prosecution, along with civil penalties under the Bank Secrecy Act of the greater of $100,000 or 50% of the annual highest account balance for six year and a 75% tax fraud penalty. By coming forward before being identified a taxpayer can minimize penalty exposure.

A taxpayer can come forward through either the use of the new Streamline Procedures or the Offshore Voluntary Disclosure Program 2014 (OVDP 2014). Advice from skilled counsel should be sought to determine which program is correct for each taxpayer. The object of coming forward is not to be the next “notch.”