Foreign Bank Accounts, FATCA, and Offshore Tax Evasion

The Financial Services Industry is paying close attention to what the U.S. Government will be enforcing in 2015. With many foreign financial institutions giving their data on U.S. accounts over to the Internal Revenue Service, account holders and companies living in and doing business in the United States need to be wary.

As the former Chief of IRS Criminal Investigations, I oversaw the investigations of foreign banks in Lichtenstein, Switzerland and other countries. Swiss bank UBS eventually paid $780 million to the IRS and Credit Suisse paid $2.6 billion in fines just to name a few. There are many others who have signed agreements with the government and others still under investigation.

The U.S. Settlement deal has enabled many foreign banks to avoid investigation and instead have cooperated in providing details on American accounts. Some are detailing what they have done wrong and paid fines rather than face possible tax evasion charges. Other banks have divested their portfolios of U.S. accounts and the account holders must find new banks that will take their deposits.

The IRS will be enforcing the Foreign Account Tax Compliance Act or FATCA this year. What that means for a foreign account holder is that many foreign banks have given over the data of U.S. accounts to the IRS and they will be matching that data with what you report on your tax return. Failure to declare your accounts is a felony and could mean jail time. IRS Criminal Investigations are taking this very seriously and recent enforcement statistics show an increase in prosecutions in the area of Foreign Bank Account Reporting or FBAR violations. FATCA violations will only increase this statistic.