Switzerland Reports 2 Million Accounts (Swiss FATCA & FBAR Risks)
You know it is a bad day in offshore banking, when Switzerland (yes, that Switzerland) announced (via the Swiss Federal Tax Administration website) that it has already exchanged accountholder information with multiple EU countries and many others.
While the transfer was to other EU countries (via AEOI) and not FATCA, it is only a matter of time before FATCA makes the situation infinitely worse for U.S. Accountholders.
How many Accounts Have Been Compromised?
As provided by the FTA:
This first exchange within the framework of AEOI provides that Switzerland exchanges in 2018 with EU states as well as with a further nine states and territories (Australia, Canada, Guernsey, Iceland, Isle of Man, Japan, Jersey, Norway, South Korea).
Transmission of data by Switzerland took place at the end of September 2018. Cyprus and Romania are currently excluded as they do not yet meet the international requirements on confidentiality and data security. Transmission of data to Australia and France is delayed, as these states could not yet deliver data to the FTA due to technical reasons. Similarly, the FTA has not yet received data from Croatia, Estonia and Poland. The other partner states have transmitted data to the FTA.
Currently, around 7,000 reporting financial institutions (banks, trusts, insurers, etc.) are registered with the FTA. These institutions collected the data and transferred it to the FTA. The FTA sent information on around 2 million financial accounts to the partner states and received information in the millions from them. Definitive numbers on information received are not yet available. The FTA cannot provide any information on the amount of financial assets.
FATCA & FBAR Makes it Much Worse
The reason why FATCA and FBAR reporting makes the disclosure much worse, is because now multiple countries that have entered into FATCA agreements with the United States will have additional information regarding Swiss Accounts held by U.S Account Holders, which they may share with the U.S pursuant to FATCA.
Moreover, if the U.S makes a Hague Evidence Convention request for the information, it can make it even worse from there….
And, because oftentimes the U.S. Government infers that a Swiss account implies tax evasion and willfulness — it could lead to bigger problems in the future.
How FATCA comes into Play (3 Steps)
Here is how the Swiss AEOI with EU countries may impact U.S. Account Holders:
Switzerland Reports to EU and Other Countries
At the end of September, 2018, the Swiss reported 2 million accounts to the following countries (some delays may have interrupted the actual transfers, but are still scheduled for transfer):
- Australia (Pending due to a technical delay)
- France (Pending due to a technical delay)
- Isle of Man
- South Korea
- *Cyprus (Pending the signing of an International Agreement)
- *Romania (Pending the signing of an International Agreement)
EU Countries Reports Information to the U.S. (Or Keeps it on File)
The United States has entered into FATCA Agreements with more than 110 different countries and more than 300,000 Foreign Financial Institutions, In addition, in accordance with the Hague Evidence Convention (and other International Agreements/Conventions), the U.S. Courts may seek information about U.S. Account Holders from foreign nations.
If these countries have information regarding Swiss accounts, a U.S. Account Holder may be at risk once the information is turned over.
IRS Audits, Examines and/or Investigates You
The IRS uses this information to pursue a civil audit or investigation — or even a referral to the IRS Special Agents for a Criminal Investigation.
Recent FATCA Criminal Conviction
Recently, on September 11, 2018 the former Chief Business Officer and former Chief Executive Officer of Loyal Bank Ltd, pleaded guilty under FATCA for committing FATCA Fraud.
Specifically, the CEO of the offshore bank (with offices in Hungary and Saint Vincent & Grenadines) pleaded guilty to conspiring to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (FATCA).
Baron was extradited to the United States from Hungary in July 2018.
FBAR & A Hague Evidence Convention Request
The “Convention on the Taking of Evidence Abroad in Civil or Commercial Matters,” or Hague Evidence Convention is a treaty signed in the Netherlands more than 40 years ago.
The purpose of the Hague Evidence Convention, is for one country to be able to make a request to another country for evidence, using a more direct manner than the usual information gathering channels (which are highly bureaucratic).
Example of a Recent FBAR Hague Evidence Convention Request
The United States District Court for the Western District of New York (“District Court”) presents its salutations to the Greek Central Authority, and requests assistance in obtaining evidence to be used in civil proceedings before this Court.”
Specifically, the District Court requests assistance in obtaining documents and oral testimony from (Redacted), a citizen of Greece, for use at trial. (Redacted) is married to the defendant (Redacted) and is also represented by the defendant’s counsel. This Letter of Request is submitted in both English and Greek.
What Can You Do?
Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Program.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.