Over 100 banks are seeking to avoid criminal investigations and prosecutions

The U.S. Department of Justice Tax Division and the Internal Revenue Service have been ramping up an intense crackdown on offshore tax evasion, and the IRS’s reduced resources due to new budget cuts is having no effect on IRS enforcement initiatives in this area.

The government’s reach has extended far beyond Switzerland, where it is pursuing criminal investigations of a dozen Swiss banks, and another 100 banks are seeking to avoid criminal investigations and prosecutions.

The crackdown has reached jurisdictions including India, Liechtenstein, Luxembourg, Barbados, Hong Kong, Singapore and Israel.

Re Israel – Bank Leumi recently entered into a deferred prosecution agreement with the DOJ, paid a penalty of $270 million, and agreed to identify numerous additional Bank Leumi account holders in the U.S. to the IRS.) Numerous investigations are being pursued in other areas as well, which have not been made public.

Fourteen active federal grand jury investigations involving foreign banking institutions, as well as the recently enacted Foreign Account Tax Compliance Act (FATCA) legislation (which mandates that a foreign financial institution identify and reveal American depositors — individual and entity — to the IRS or suffer a 30 percent withholding on withholdable payments and pass-thru payments), along with the DOJ amnesty program for Swiss banks (BSI SA became first Swiss bank in this disclosure program to agree to pay a $211 million penalty and turn over U.S. account holder’s identity to escape criminal charges) to disclose how they aided tax evasion. Taken together, all of the foregoing will result in the eventual disclosure of several thousands of taxpayers’ identities to the IRS.

To date, taxpayers have made more than 52,000 disclosures since the first IRS Offshore Voluntary Disclosure Program (OVDP) opened in 2009, and tax authorities have collected more than $7 billion from these initiatives alone.

For individuals and business entities with undisclosed foreign accounts and unreported income from international sources, time is of the essence to review the options available. These are dangerous times; nothing is more destructive than a criminal tax investigation with the real probability of prison time and draconian fraud and FBAR (foreign bank account report) penalties.

Foreign Account Tax Compliance Act (FATCA) =http://1.usa.gov/1c5kQYr

IRS Offshore Voluntary Disclosure Program (OVDP) = http://1.usa.gov/1AmmWi5