[B]anks cooperating with the U.S. government turn over specific data, including details about the dates, amounts, and destinations of wire transfers that close out U.S. persons' accounts. While the account holders' names are not revealed, it is widely expected that the DOJ will use the detailed information on these so-called leaver lists to file group requests with the Swiss competent authority to obtain the identities of U.S. taxpayers who have not disclosed their account details.
[Mark] Matthews [of Caplin & Drysdale] said a team will be looking to see if the U.S. has a tax treaty with the country where the funds transferred out of a Swiss account were sent. "They will now have the beginnings of the evidence to create a valid treaty request . . . and go after that same information in that other bank," he said, "so [the IRS has] put together a pretty neat little vice here." The message for individuals who think they're safe because they got their money out of Switzerland and into countries such as Panama is that "there's a very high chance they're going to find you," Matthews said.
Banks that actively market themselves as discreet destinations for undeclared cash have cause for concern as well. "There's sort of a special place in hell in the Justice Department's mind for people who run and hide," Matthews said. "And the banks who took on people . . . who were running from Switzerland, the Department of Justice really finds that behavior offensive, both on the part of the banks and people who are running. That is a very dangerous thing to be doing these days."
Steven Toscher, a criminal tax lawyer at Hochman, Salkin, Rettig, Toscher & Perez PC, said the government's strategy with the voluntary disclosure and Swiss bank programs is brilliant because of the magnitude of the problem and the scarcity of resources available to address it. "It's based on the presumption they can't prosecute everybody," Toscher said. "They just don't have the resources."Other key points:
- Toscher reminded that other types of financial institutions than banks -- such as trust companies -- are within the scope of the IRS and DOJ Tax's interest.
- As suggested above, the bank leaver lists showing the destinations of the funds as they left Swiss banks feeling heat will lead the IRS and DOJ Tax to institutions in othere countries. Matthews mentioned specifically "Singapore, Hong Kong, Dubai, Israel, [and] Panama."
- The question was asked whether the criminal statute of limitations (6 years for most title 26 crimes and 5 years for most title 18 crimes, although the offense and defraud / Klein conspiracies charged under title 18 have a six-year statute of limitations under Section 6531(8), here,) potentially provides relief for taxpayers or financial institutions who shut down their misbehavior as things were heating up in 2008. The article says that "Matthews said the DOJ can still resort to conspiracy charges, which he said go back six years from the date of the last act of the conspiracy." And, that would apply for acts of co-conspirators. Moreover, for "solo" tax crimes such as evasion, acts in furtherance of the crime could set a new date. For example, I was asked recently about the requirement in 18 USC § 3506, here, to report to the U.S. Attorney General attempts in foreign courts or with foreign authorities in opposition to an official U.S. request. Such an attempt, even if not subject to a separate crime, could be construed as an affirmative act that refreshes the statute of limitations on the original substantive crime.
- Talking about a "go forward" strategy -- good returns and FBARs from this day forward, with no voluntary clean up of the past -- Matthews noted that there was a "whale of penalties" out there, so that the strategy might work only for smaller foreign accounts.
- Toscher noted that, even when foreign banks have no obvious nexus with the U.S., the U.S. authorities might still get to them through the correspondent banks that they use to conduct U.S. business.
- Matthews noted that the lighter sentencing for convicted offshore tax defendants relative to other tax defendants (let's call them onshore defendants to differentiate) reflects several factors -- bad case selection in some dramatic cases, the fact that many others were able to avoid prosecution under some iteration of OVDI/P (that is the nature of voluntary disclosure programs), and the potential large FBAR penalties which are factored into the sentencing calculus. Matthews is quoted as saying "You would think that, dollar for dollar, [those involved in hiding assets in Switzerland] would get more jail time than the . . . regular tax cheat," In this regard, although not mentioned in the article, offshore accounts are considered sophisticated means warranting a 2-level upward adjustment under Sentencing Guidelines 21.1(b)(2), here. Toscher is quoted as saying that the offshore account sentences "are not reflective of routine tax cases" and will not be "reflective of what the next rounds of foreign criminal tax cases are going to be." I guess his idea is that the judges will not feel locked in by the pattern that has been set to date and will be more concerned about the disparity between offshore defendants and onshore defendants.
- Toscher noted the ironical truth is that the toughest sentence was imposed on Brad Birkenfeld whose information led DOJ and the IRS to UBS and, through that initiative, the rest of this ugly side of Swiss banking generally. Birkenfeld did get $104 million for the key role he played, but he also received a 40 month sentence.