Is Time Running Out for the Offshore Voluntary Disclosure Program?

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The deadline imposed by the Department of Justice (DOJ) for approximately 300 Swiss banks to come forward and request non-prosecution agreements expires December 16, 2013. In order to be eligible for a non-prosecution agreement a bank must meet the following criteria according to the press release of the DOJ:

“Under the program, which is available only to banks that are not currently under criminal investigation by the department for their offshore activities, participating Swiss banks will be required to:
•Agree to pay substantial penalties
•Make a complete disclosure of their cross-border activities
•Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest
•Cooperate in treaty requests for account information
•Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed
•Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations”

What this means for U.S. taxpayers is that for those taxpayers who have not come forward and entered the Offshore Voluntary Disclosure Program (OVDP) and who have accounts at banks in Switzerland, the window of opportunity is quickly about to close. It is the position of the DOJ that if a U.S. taxpayer is discovered before coming forward and entering the OVDP or otherwise meeting an exception to the reporting laws and regulations, their conduct will be deemed to be “willful”. A determination of “willfulness” will be based upon the fact that taxpayers have had three opportunities to come forward, 2009,2011 and 2012 programs. The penalties for will conduct are civil fines of the greater of $100,000 or 50% of the highest account balance per year for up to six (6) years. This means that for an account open for 6 years with an a constant balance of $1,000,000 the penalty could be $3,000,000. The civil penalty is imposed under the Bank Secrecy Act and in addition, that taxpayer will face income tax on unreported income and possibly a 75% tax fraud penalty.

The DOJ has recently stated that the comprehensive nature of the Swiss program may not be needed in other countries where there are other processes in place already. An example is the enhanced focus on the Middle East (including Israel)and on South Asia, including India, Singapore and Hong Kong.

Taxpayers who wait to get a letter from their banks requesting compliance information will very likely be getting that letter after their information has been disclosed to the DOJ. Waiting is a gamble that very few should take for the outcome is likely to be catastrophic regardless of how you view the odds. It is now time to come forward.

 

Topics:  Banks, Disclosure, DOJ, Non-Prosecution Agreements, OVDP, Voluntary Disclosure

Published In: Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Sanford Millar, Law Offices of Sanford I. Millar | Attorney Advertising

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