Bank of Butterfield US Account Holders & the IRS
Bank of Butterfield US Account Holders may be under investigation: Over the past 10+ plus years, The Department of Justice has entered into several non-prosecution agreements with Foreign Financial Institutions in order to uncover the names and information of US account holders who may have been evading tax and reporting requirements, such as FBAR and FATCA. In addition, the Internal Revenue Service closed down OVDP — and while VDP is still a viable and effective option for some Taxpayers — the rules are different and a bit more stringent than they were under OVDP — although Taxpayers can sometimes have a better opportunity to try to negotiate the VDP penalty if they have facts sufficient to do so without having to formally opt-out as they would have had to do under OVDP. Therefore, Taxpayers concerned about being audited or investigated (and losing the right to voluntary disclose) should consider their options.
Here is the Department of Justice is announcement on the matter:
Manhattan U.S. Attorney Announces Agreement With Bermudian Bank To Resolve Criminal Tax Investigation
The Bank of N.T. Butterfield & Son Limited Pays $5.6 Million in Forfeiture and Restitution; Receives Non-Prosecution Agreement as a Result of its Cooperation
Audrey Strauss, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Bank of N.T. Butterfield & Son Limited (“BUTTERFIELD”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5.6 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2013.
The NPA was based on BUTTERFIELD’s extraordinary cooperation, including its efforts in providing 386 client files for non-compliant U.S. taxpayer-clients, and provides that BUTTERFIELD will not be criminally prosecuted. The NPA requires BUTTERFIELD to forfeit $4.896 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $704,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by BUTTERFIELD’s U.S. taxpayer-clients.
Manhattan U.S. Attorney Audrey Strauss said: “Butterfield admits to helping its clients conceal their ownership of foreign bank accounts to avoid their U.S. tax obligations. Butterfield allowed its U.S. clients to use sham entities that assisted those U.S. clients in funneling money between U.S.- and Cayman Islands-based accounts.
The resolution of this matter through a non-prosecution agreement, along with forfeiture and restitution, reflects Butterfield’s cooperation in our investigation and demonstrates that cooperation, including assistance in providing U.S. taxpayer client files, has tangible benefits. We will continue to pursue financial services firms around the world that help their clients evade U.S. taxes.”
Acting Deputy Assistant Attorney General Stuart M. Goldberg said: “As part of the resolution announced today, Butterfield has facilitated the production of approximately 386 unredacted client files. Taxpayers contemplating hiding money offshore and those who would facilitate their fraud should take note – nothing remains hidden forever.”
IRS-CI Chief James C. Lee said: “As a result of the successful resolution of this investigation, Butterfield has agreed to turn over account files relating to U.S. taxpayer-clients who maintained undeclared assets overseas. This agreement marks yet another significant step forward in combating offshore tax evasion. Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted. It’s not a matter of ‘if,’ it’s a matter of ‘when.’”
As part of the NPA, BUTTERFIELD admitted various facts concerning its wrongful conduct and the remedial measures that it took to cease that conduct. Specifically, BUTTERFIELD admitted that it knew or should have known certain U.S. taxpayers were using their BUTTERFIELD accounts to evade their U.S. tax obligations, in violation of U.S. law.
BUTTERFIELD acknowledged that it helped certain U.S. taxpayer-clients conceal from the IRS their beneficial ownership of undeclared assets maintained in foreign bank accounts by: (i) maintaining undeclared accounts for U.S. taxpayer-clients that were held by sham entities – structures that had no legitimate business purpose – even though Bank personnel knew, or should have known, that the entities were being used to conceal the identities of the true account owners; and (ii) opening accounts and facilitating the transfer of funds for U.S. taxpayer-clients despite obvious red flags that the U.S. clients were using the accounts to maintain undeclared assets or commit tax evasion.
The NPA recognizes that, in 2013, BUTTERFIELD implemented a series of remedial measures to stop assisting U.S. taxpayers evading federal income taxes. The NPA further recognizes BUTTERFIELD’s cooperation, including its efforts to facilitate the production of approximately 386 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers.
As part of the NPA, BUTTERFIELD has agreed to forfeit $4.896 million to the United States, representing the gross revenues from services that it provided to U.S. taxpayers with undeclared foreign bank accounts from 2001 through 2013. In connection with this forfeiture, BUTTERFIELD has agreed not to contest a civil forfeiture action filed by the United States.
The NPA requires BUTTERFIELD to continue to cooperate with the United States for at least three years from the date of the agreement. In the event that BUTTERFIELD violates the NPA, the U.S. Attorney’s Office may prosecute BUTTERFIELD.
Ms. Strauss thanked the IRS for its outstanding work in the investigation of this matter and thanked the Tax Division of the Department of Justice for its assistance in the investigation.
This investigation is being overseen by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorney Kiersten A. Fletcher is in charge of the matter.
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