Interview of Acting Assistant Attorney General Ciraolo on Tax Enforcement (3/23/16)

The New York Law Journal has published this article of an interview of Acting AAG Caroline Ciraolo.  Jeremy H. Temkin, DOJ Tax Division Today: Interview With Acting Assistant Attorney General, 255 NYLJ No. 55 (3/23/16), here.  The interview is a general overview of the Tax Division's work, with particular focus on offshore accounts that have been perhaps its most visible effort over the past few years.  Of course, there is the expected claims of great success on the offshore efforts starting in 2009, with many prosecutions of individuals and financial institutions and much revenue gathered.

I focus in the balance of this blog only on matters that I found particularly interesting.

1.  Regarding follow-through, Ciarolo says that DOJ  and the IRS are following leads they have obtained in the various efforts and are continuing to obtain from various sources "to identify and investigate U.S. accountholders who willfully concealed their foreign accounts and evaded U.S. tax, as well as those entities and individuals, foreign and domestic, that facilitated this criminal conduct."

2.  Category 3 and 4 information:

Finally, Tax Division attorneys and IRS personnel are reviewing the information received from Swiss banks that fall under Category 3 and Category 4 of the program. Category 3 and 4 banks maintain that they did not commit any violations of U.S. law, and seek a non-target letter after providing information required by the program.

I have written before that I am baffled that any Swiss Financial Institution would have proceeded under Category 3 or 4.  See US DOJ Swiss Bank Program Categories 3 and 4 Comments (Federal Tax Crimes Blog 2/4/16; 2/7/16), here.  Certainly, though, the Financial Institutions that did join under Categories 3 or 4 would have expected to have been closely scrutinized.

3.  Countries Other than Switzerland:

Great Graphic on U.S. DOJ Swiss Bank Program Results (10/11/15)

BloombergBusiness has an article with a great interactive graphic on the U.S. DOJ Swiss Bank Program results.  David Voreacos and Giles Bloom, U.S. Chases Swiss Bank Secrets to Singapore and Israel (BloombergBusiness 10/8/15), here.  In addition to the graphics, some excerpts are:

Martin Naville, chief executive officer of the Swiss-American Chamber of Commerce, said the settlement process has been difficult for many firms, with some feeling they’ve been “slighted and not treated very well.” But he said the penalties were smaller than what many banks had budgeted for. 

That’s due in part to an unusual aspect of the amnesty program. Penalties are pegged to how many clients banks successfully pushed to reveal secret accounts and the firms that aided them. The more individuals who came forward, the less banks had to pay. 

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U.S. agents interviewed taxpayers who used a Singapore money management firm to hide assets from the IRS, said Bryan Skarlatos and Scott Michel, lawyers who separately represent some of those Americans. They wouldn’t identify the firm, and Ciraolo wouldn’t discuss it. 

“Certainly, Singapore would be one of the jurisdictions that we’re looking at,” Ciraolo said. 

Societe Generale SA’s Swiss private banking unit admitted in its settlement that it transferred assets of U.S. customers to “corporate and individual accounts at other banks in Switzerland, Hong Kong, Israel, Lebanon, Liechtenstein and Cyprus,” according to its statement of facts. The unit paid a $17.8 million fine.  A bank spokesman declined to comment. 

In its settlement document, Banque Pasche SA said that client money was transferred to banks located in Israel and Hong Kong “in an attempt to further escape detection.”  An e-mail and phone call to the bank weren't returned. 

Israeli Banks 

Israeli banks have drawn special focus from the Justice Department. Last year then-Deputy Attorney General James M. Cole cited “an ongoing and extensive investigation” into hidden bank accounts in Israel. Bank Leumi Le-Israel Ltd. agreed to pay $400 million to resolve its criminal case. 

More Developments on Offshore Banks in Switzerland and Beyond (5/31/13)

There is a continuing virtual flood of information on Switzerland's recent moves and some ripple effects of the U.S. and the U.S. inspired other-country initiatives to get past offshore bank secrecy to chase major sources of tax revenue.

It is reported that the new Swiss proposal and earlier less dramatic moves to share information with the U.S. have many Swiss bankers and related enablers worried.  See James Shotter, Swiss tax proposal jolts bank workers (Financial Times 5/31/13) here.  Some of the personnel involved in the egregious conduct have already been indicted by the U.S.  More are being considered for indictment, along with some of the more egregious banks who took in U.S. customers -- including significantly UBS customers -- after UBS was forced to close its tax evasion enabling business.

Not surprisingly, the money will move from -- or avoid in the first place -- Swiss Banks.  This means the money must find another "haven."  Now where will that be?  Contemporaneously, a lot of wealth build-up is going on in SE Asia.  Swiss banks might have been attractive in the past, but are less so now.    See Martin Vaughan, Singapore, Hong Kong to Claim Larger Share of Offshore Wealth Pie (WSJ SEAsia 5/31/13), here.  Some excerpts:

Private banks in Singapore and Hong Kong will capture an ever-larger share of global wealth held offshore as the ranks of the super-rich in Asia grow faster than elsewhere in the world, according to a report from the Boston Consulting group. 

Offshore wealth rose by 6.1% globally to $8.5 trillion last year, the new BCG study said, and will continue to grow apace as high net worth people seek to protect their wealth by stashing it where there is political stability, a low tax burden and banking expertise. 

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