Thursday, June 2, 2011

IRS Ratchets Up Its Focus on the Enablers (6/2/11)

Observers of the IRS offshore financial account initiative have known for a long time that the IRS had its sights on enablers (persons who promoted and enabled taxpayers into offshore accounts for U.S. tax evasion purposes). In the template letter required in the two programs, participants were required to identify enablers. Then IRS then took that information and built databases of names and relationships that could identify the signficiant enablers. At least anecdotally, practitioners observed that the IRS seemed to be particularly interested in enablers who had some U.S. presence -- particularly, as in the case of the UBS enablers, those who moved into and out of the country in stealth mode to sell their evasion services. This is probably not new to most of the professional readers of this blog.

In a very good article, a Bloomberg Business Week reporter discusses some of the IRS's efforts. The article is David Voreacos,The IRS Grills Taxpayers on Offshore Accounts, Bloomberg Businessweek (6/2/11). It is not a long article and is well-written, so I just link to it for you. 

The article does mention that more than 100 federal prosecutors are working the initiative. I think most practitioners have seen perhaps 5 or 10 federal prosecutors surface with follow-through questions for taxpayers about enablers, but the more than 100 figure seems surprising (at least to me). The article also says that the prosecutors are paying particular attention to accounts that moved from UBS to the local or regional banks as UBS was taking heat from the U.S.

Those wishing some statistics regarding both taxpayers and enablers and the banks involved can find them in my spreadsheet available by clicking on the item at the top of column at the right of this blog.

The banks mentioned in the article: Credit Suisse, HSBC, UBS, Basler Kantonalbank, Julius Baer, Bank Leumi, and Bank Happalim.

The Government has brought some charges against enablers who are studiously avoiding coming into the U.S. I think that that the publication of those charges was to keep the publicity drum beat going. I suspect that the Government has obtained additional indictments that are sealed for use if the enablers charged attempt to re-enter the country.  I would think that there are a lot of Swiss bankers and related enablers that are less likely to be visiting the U.S. anytime soon.  And, the mining of the databases will also identify bankers and related enablers from tax havens and even from countries not traditionally thought of as tax havens.  The initiative may also curb their appetites for visits to the U.S.


  1. Fascinating article. This reporter at Bloomberg and Lynley Browning at the New York Times have been all over the offshore account story for many years now. They likely have some very good sources.

    Credit Suisse is still claiming its not a 'target'. I did read a report that they were asking all their American customers who didn't sign W-9's to close their accounts. At this point, would even a Swiss bank take American money that is radioactive ?

    It will be interesting to see what happens with Basler KantonalBank. The bank has no US presence, and its majority owned by a local government. Can the bank brazen it out ?

  2. I've had clients in the 2009 OVDP pass the Criminal Investigation (CI) inquiry and then proceed to the civil side of the IRS. Then, a year or more later, we are contacted by an IRS CI agent who asks for documents regarding the client's account and interaction with Bank X.

    I'll note that at this point, before we proceed, we want reassurance from the CI agent that it's not the client who is being investigated by CI, but Bank X. (Obviously if the client is under IRS criminal investigation, our interaction with the IRS take a different track.)

    My conclusion is broader than what Voreacos is suggesting. My conclusion is that this isn't merely an *enabler* issue, although enablers are being investigated and prosecuted too. Bank X is being investigated, for the same reasons that UBS, HSBC and various other foreign banks have been investigated. I think more John Doe summonses or indictments against banks, and enablers, are forthcoming.

  3. The article states that 200 or more disclosers were interviewed by DOJ or CID. I assume these people were in the disclosure process and had not closed with a 906 agreement. Is this assumtion likely correct or could you forsee these types of interviews occuring in cases that were settled and closed with a 906?

  4. Don't you think these things will slow down after the OVDI closes and focus shifts to FATCA? Do you have a blog on FATCA?


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