Saturday, June 15, 2013

IRS Makes Treaty Request for Wegelin Information Involving Asset Management Companies (6/15/13)

The IRS has filed a treaty request for U.S. taxpayer information from Wegelin & Company, the company that pled and went under.  See US continues hunt for tax dodgers in Swiss banks (6/14/13), here.  The following are key excerpts:
The United States tax authorities have filed a request for legal assistance to identify former American clients of the private bank Wegelin who are suspected of tax dodging. It is the fourth such request against a Swiss financial institute. 
Wegelin, which announced at the beginning of this year it would close its doors, on Friday confirmed reports that it had received notification by Switzerland’s Federal Tax Authorities to comply with the US request, based on a 1996 double taxation agreement.

A bank official added that Wegelin would submit the necessary information.

The request focuses on former Wegelin clients who were listed as beneficiaries of asset management companies between 2002 and 2012 and are suspected of fiscal fraud, according to the Neue Zürcher Zeitung newspaper on Friday. 
* * * * 
It is the fourth such demand against Swiss banks. The country’s two main banks, UBS and Credit Suisse, have also faced requests against a particular group of clients over the past few years.
JAT Comments:

1.  Note that the request "focuses" on those clients "listed as beneficiaries of asset management companies between 2002 and 2012 and are suspected of fiscal fraud."The report does not indicate what either of these conjunctive descriptions are.

2.  By contrast, the Julius Baer request I previously reported, see U.S. Treaty Request for Julius Baer Domiciliary Company Accounts with U.S. Beneficiaries (Federal Tax Crimes Blog 5/28/13), here, asked for information on "domiciliary company accounts."  I think I understand at least to some extent what that "domiciliary company accounts" means -- i.e., the U.S. taxpayer inserted one or more entities between him and the account to obscure ownership.  But, apparently, that was not the request made to Wegelin, at least as described in the report.

3.  It seems to me that "asset management companies" could mean either the companies (or entities, however described) which the client owned through which the client beneficially owned the bank account(s) or it might mean the Swiss asset management companies who managed bank accounts for U.S. taxpayers.  I would appreciate a reader or readers either commenting or emailing me with an understanding of what information is being requested.


  1. Apparently they are asking for information on accounts being managed by portfolio managers not employed by the bank. These are individuals or companies that provide the same service as a managed account at a US broker with the difference is that the account is held at the bank (Wegelin in this case) and the outside firm makes investment decisions. The bank still knows who the account belongs to, (and must follow the same due diligence and identification requirements as when opening an individual account.) Though not mentioned in the article, it would be logical that there would be other criteria, such highest balance during the period over a certain amount.

    "Suspected of fiscal fraud" in the case of the original UBS request meant " income" above a certain amount per year. Don't recall the specifics of UBS, the amount was probably $100,000 or more, but was arrived at a very sloppy assumption: any sale of an asset was considered "gross income" and it was assumed that the income (for purposed of whether the account would be suspected of fiscal fraud) at 50% of gross proceeds (without bothering to look at the actual gain/loss.)

    So simply exchanging a large foreign currency deposit into another currency, or cashing a money market fund, or selling a large amount of stock, even if it resulted in minimal actual income or a loss, would be enough to fit the "suspected of tax fraud" definition


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