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International Ripple Effect of FATCA, IRS, and the US Department of Justice

Although the Swiss Government has agreed to cooperate with new FATCA mandates requiring information regarding US Citizens and Green Card Holders with undisclosed foreign financial assets to be share with the United States, there is still a persistent game of ‘cat and mouse’ between some Swiss Banks and the IRS and DOJ (Department of Justice).  Accounts in certain banks which are and have been held by US Persons are being transferred to other banks in an attempt to ‘hide the paper trail’ from investigating US Institutions.

What This Means for Americans with Swiss Financial Accounts

This evasive practice could prove to be financially and criminally devastating to Americans who still have undisclosed accounts in the Swiss Banks that are trying desperately to deflect attention.  The truth is that the IRS and DOJ are not only looking for current active foreign financial accounts; they are also searching through foreign bank records as far back as 5-10 years.

The harder foreign banks try to hide account information and alter details, the more at risk American Account Holders become of no longer being eligible to enroll in what may be the final OVDI (Offshore Voluntary Disclosure Initiative) offered to American Persons with undisclosed foreign financial assets.

FATCA, Foreign Accounts and Singapore

Singapore is in an interesting position with suspicions mounting after an estimated 50% increase of foreign deposits into Singapore Banks after the DOJ began indicting Swiss Bank Officials.  The Singapore Government and Singapore Banks are pledging their willingness to cooperate with the IRS to comply with all FATCA requirements to avoid being blacklisted once again by the United States as an uncooperative tax haven.

Singapore is currently among one of the primary financial centers in the world and seems to be interested in holding on to its newly acquired reputation.  As such, in addition to its agreement to honor information sharing requests submitted by the United States, it has also agreed to take steps to identify accounts in which funds that were transferred from Swiss banks for the purpose of tax evasion and seize such accounts. The alternative to Singapore cooperation is indictment by the DOJ.

United States, United Kingdom, and Australia

The IRS has recently entered into agreements with the United Kingdom and Australian Tax Authorities to exchange information about offshore trusts and corporations.  As a result of these information sharing agreements, a number of foreign corporations and trusts which seem to have been formed with the intention of laundering money have been identified – along with the names of the owners, affiliated persons, and advisors who helped to organize such entities.

Time is Running Out

It’s hard to imagine that so much information has been uncovered and the IRS and DOJ is literally just getting started.  This ‘domino effect’ will continue over the course of the coming months and years. Currently, the latest OVDI is still active and seems to be the only way to avoid excessive penalties and a federal prison sentence.  It’s becoming ever-so-clear that the initiatives set forth this year by FATCA are being taken very seriously by the IRS and DOJ and that foreign banks and US Citizens and Green Card Holders are being given 1 alternative to cooperation:  Criminal prosecution.

Many US Citizens and Green Card Holders are under the impression that if they close their unreported foreign financial accounts they will be ‘in the clear,’ but this couldn’t be further from the truth.  If you held a foreign financial account in one or more previous years with a balance of more than $10K (whether alone or when combined with other foreign financial accounts) and you failed to report these accounts, you are already in a state of noncompliance and are therefore liable for your noncompliance to the full extent of the law.

That means:  Even if you close your foreign bank account today, you still need to enroll in the OVDI and submit an FBAR for each year that account was open.  If you simply close your account and take no other action you may remain undetected for another 6-8 months, but odds are VERY HIGH that your historic foreign financial account information will be discovered and you will be facing the maximum financial and criminal penalties.