Thursday, September 4, 2014

Article on Swiss Banks in U.S. DOJ Program (9/4/14)

I direct readers to a very good recent article discussing the end game for Category 2 Swiss banks and those who did not join.  Matthew Allen, Banks Agonize Over Us Tax Evasion ‘Guilt’ ( 9/2/14), here.

The article discusses banks that have announced or are rumored to be considering dropping out of the U.S. DOJ program.
So why should a bank virtually accuse itself of aiding tax cheats one day and the next walk away from a treaty that protects it from potentially ruinous criminal indictment? 
Part of the reason can be traced back to the birth of the Swiss-US non-target letter deal in August 2013, a period of intense uncertainty and danger for the whole Swiss banking sector.
In January 2012, Wegelin was found guilty of aiding tax cheats by a US court and ended its 273-year existence. In the summer, the Swiss parliament rejected a government proposal to end the long-running tax evasion dispute by handing over client details to the US. 
The scene looked set for more Wegelin-style casualties, a dire outlook that was brought into sharper focus when Bank Frey ceased operations in October because it could not afford to fight the US authorities. 
The country’s regulator, the Swiss Financial Market Supervisory Authority (FINMA), urged banks to swiftly join the non-target letter programme despite protests that the details were too vague and that banks needed time to comb through their accounts for US tax cheats.
In addition, the article addresses banks that never joined as Category 2.
However, the suspicion remains that other banks are playing a far more dangerous game by never entering the scheme in the first place. 
“Certain banks may have decided not to register in the programme on the basis of a cost-versus-risk assessment,” said Troller. “Their rationale being that if they should ever get prosecuted, then the fines or other consequences would be more manageable than the cost of entering the system in the first place.” 
The DoJ made it very clear on brokering the non-target letter deal that non-compliant banks could face serious sanctions if they do not admit the error of their ways and are caught.
And, caught in the middle are innocent U.S. taxpayers:
Caught in the crossfire of these strategies, however, are thousands of bank clients who are either innocent of tax evasion offences or were unaware of their reporting responsibilities.
These include US citizens living and working in Switzerland who cannot open bank accounts or take out mortgage loans. In some cases they have been expelled by their banks as involving too much unwanted paperwork and risk. 
A number of dual Swiss/US citizens have also complained at being unnecessarily dragged into the row and have been saddled with competing a time-consuming and expensive paper trail proving that they have never worked – or indeed in some cases never lived – in the US.


  1. "A number of dual Swiss/US citizens have also complained at being unnecessarily dragged into the row and have been saddled with competing a time-consuming and expensive paper trail proving that they have never worked – or indeed in some cases never lived – in the US."

    UCCD Unintended Consequences and Collateral Damage of our offshore jihad.

  2. Honestabe1947, I absolutely do not recall!! I am terrible frustrated by it. I know I have read it somewhere because it struck fear in me realizing it applied to me. So I HAVE read it. If anyone knows more about this, please let us know. If I end up figuring out were I found it I surely will post it.

  3. Thinking more about it, I think it was in the IRM somewhere and it was in the context of someone else managing your ACCOUNTS.

  4. Jack, it's about $15K income yearly for 6 years, and a tax deficiency of about $1K per year.

  5. WOULD ANYONE comment on the following: 1) How likely is it that the IRS would contact a tax preparer on an OVDP transition to SDOP request. 2) Have you ever heard of a tax preparer misrepresenting facts about the taxpayer to the IRS? My concern is my tax preparer for the last 6 years of the OVDP years was, unfortunately, not very good. I found mistakes constantly which he would hate to acknowledge. Eventually I fired him and did not pay his last bill. His mistake would have costed me way more than his bill. This person is extremely angry with me to this day.

  6. I read numerous articles and talked to CPAs but no one is able to clarify as to whether I need to file 8621s if there were no activity on the mutual funds for the years prior to 2013. Below is what I found on, I agree that from 2013 onwards all PFICs need to be reported regardless of activity/distribution. But can someone clarify what to do for the prior years?

    "Section 1298(f)

    The Hiring Incentives to Restore Employment Act of 2010 (the HIRE Act) added IRC §1298(f) effective March 18, 2010. Section 1298(f) is a relatively short provision simply stating that a U.S. shareholder of a PFIC must file an annual report unless the Treasury Secretary grants an exception.

    The HIRE Act also amended IRC §6501(c)(8) to indefinitely suspend the statute of limitations with respect to a taxpayer’s entire tax return for failure to file certain required foreign transfer and foreign asset forms, including Form 8621 under §1298(f), until the information required to be reported is provided to the IRS. If the failure to file is due to reasonable cause and not willful neglect, the statute of limitations period only is suspended with respect to the item or items related to the failure to file.

    Although §1298(f) is effective as of March 18, 2010, the IRS suspended §1298(f) reporting in Notice 2011-55 for tax years beginning after March 18, 2010, until regulations under §1298(f) were issued and Form 8621 revised. Notice 2011-55 would have applied the §1298(f) reporting requirements retroactively to tax years beginning after March 18, 2010, once regulations were issued; however, the §1298(f) regulations issued on December 30, 2013, eliminate the retroactive filing requirement and apply §1298(f) reporting only for tax years ending on or after December 31, 2013."

  7. Interesting, thanks. What is the general consensus on this Mopsick attorney? I spoke to one who used him as an attorney but was not pleased. I was told that the facts of his cases were always confused and he did not seem to give any real insight on his case but rather felt like more of an expensive form preparer more than anything. I think this guy ended up with an another attorney.

  8. Yes you are correct he is a compliance lawyer - stay away if you do not belong into OVDP

  9. There was a previous conversation on what I termed FBAR ambulance chasers. Might be worth checking that out:

  10. I should also say my previous comment (if published) is directed more at the idea that a lawyer could be an expensive form preparer, could be confused about meaningful facts and could fail to provide real advocacy than a judgement on whether the particular lawyer in question is any good. I have neither met nor used the attorney you reference and make no comment as to that attorney's capabilities.

  11. I think you have to be prepared for the IRS to contact your preparer. The best thing you can do is have your lawyer contact the preparer and ask the same questions the IRS is likely to ask. If your lawyer gets the sense the preparer is extremely biased, he may counsel you not use your preparer as an excuse for filing errors. Alternatively he may be able to advise your preparer of the cost of personal/professional liability for false statements, which may keep him honest.


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