Offshore Account holders Need to “Know When to Fold’em”


Kenny Rogers is known for his rendition of the song “The Gambler” (The Gambler lyrics © Sony/ATV Music Publishing LLC) which contains the refrain “You gotta know when to hold’em and know when to fold”em” . The song could not be more appropriate than for those taxpayers who have undeclared offshore accounts and whose “advisers” have an incentive to come forward and expose their accounts to U,S. prosecutors. Some may come forward to simply avoid prosecution themselves or to mitigate their potential sentences while some may come forward with the hope of receiving a :whistleblower reward. Regardless of the advisers motives those taxpayers who have been slow playing their hands by not coming forward face more and more daunting odds against them. Take for example the case of Edward Paltzer (“Paltzer”) of Zurich Switzerland.

Paltzer was a partner in a Swiss law firm. He is accused of counseling clients on how to avoid reporting their Swiss and other offshore accounts. Among the reported mechanisms that Paltzer is accused of using are corporations that were formed in the British Virgin islands and using foundations formed in Lichtenstein. Reports are that Paltzer may cooperate and provide account information on his banks U.S. clients whom he may have assisted in avoiding the filing of Reports of Foreign Financial Accounts (FBAR’s) and other information returns. The result is that clients of Bank Frey are now at greater risk of their now not so secret accounts leading to their prosecution.

Whether Paltzer files a whistleblower claim is the subject of speculation. But whether he does or doesn’t the appearance of the incentive may be enough for other offshore bankers and key advisers to come forward. Taxpayers who do not come forward risk prosecution for failing to file FBARs, and other information returns, and filing false income tax returns. Sentences can be stiff and financial penalties crippling ($100,000 or 50% of the high account balance per year for willful FBAR violations). There is the possibility of money laundering charges being added to the case if foreign corporations, foreign foundations or offshore trusts are used to disguise the ownership of offshore accounts.

The question is should you come forward by entering the Offshore Voluntary Disclosure Program (OVDP) which provides some certainty of outcome or go “all in” hoping not to get caught. Most gamblers die broke, so is time to hold’em or time to fold’em?

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.

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