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Higher Penalties for Bad Banks

Offshore Account Update

Posted in on April 10, 2015

If you have not filed your FBARs (Report of Foreign bank and Financial Accounts) and IRS Form 8938 for all of your offshore accounts each year, you could face criminal and civil penalties if the IRS finds out. The IRS is cracking down on banks, and financial institutions are turning over accountholder names, so there is a good chance you will be identified if you haven’t disclosed offshore investments. 

If you are investigated by the IRS before you are participating in the Offshore Voluntary Disclosure Program (OVDP), it is going to be too late for you to take advantage of the chance to reduce penalties.

The OVDP program has evolved and there are already certain investors who will face more serious financial consequences for coming forward even with participation in OVDP.

You do not want to wait any longer to report your accounts, because the consequences of non-reporting are only getting worse. A New Jersey tax evasion lawyer is here to provide you with help determining if you can qualify for the streamlined reporting program or if OVDP is an option for you.

Some Investors Now Face Higher OVDP Penalties

Investors with money offshore who didn’t report it face fines of the greater of $100,000 or 50 percent of the value of offshore accounts for each violation.  Every year you did not file an FBAR is considered a separate violation. There have been cases where investors have ended up being fined 150 percent of the value of the offshore account, losing the money that they had invested and then some. You could also be criminally prosecuted if you don’t come forward.

The Offshore Voluntary Disclosure Program lets you escape criminal penalties and limits civil fines. For some OVDP participants, fines are set at 27.5 percent of the value of the offshore accounts.

However, if you invested at certain financial institutions that have been classified as “bad banks,” then OVDP penalties are 50 percent of the account’s value. This is still better than the penalties you could end up with if you don’t participate in OVDP.

There used to be 10 financial institutions on the “bad banks list,” but now there are 12. Bank Leumi was just added to the list after settling tax evasion charges with the U.S. for $400 million. The banks on the “bad bank” list now include:

  1. UBS AG
  2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
  3. Wegelin & Co.
  4. Liechtensteinische Landesbank AG
  5. Zurcher Kantonalbank
  6. Swisspartners Investment Network AG, Swisspartners Wealth Management AG, Swisspartners Insurance Company SPC Ltd., and Swisspartners Versicherung AG
  7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
  8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
  9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
  10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
  11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates
  12. Bank Leumi le-Israel B.M., the Bank Leumi le-Israel Trust Company Ltd., Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA

Anyone who had accounts with the first 10 banks on the list will face the higher “bad banks” penalty if they submitted a pre-clearance request on or after August 4, 2014.  Investors with accounts at Sovereign Management face the higher penalties if their pre-clearance request was submitted after December 19, 2014. Those with accounts at Bank Leumi face the higher penalties if they submitted a pre-clearance request after December 22, 2014.

If your bank is on the list and you haven’t come forward, it is important to realize that even these additional penalties that come with OVDP can be much better the consequences if the IRS finds you.

With banks and bankers turning over customer information as part of their own settlements with the Justice Department, you do not want to wait for the IRS to get your name and come after you.  If your bank is not on the list and you haven’t filed FBARs yet, your financial institute could be the next one added- do not wait to get your pre-clearance request filed.

A New Jersey tax evasion attorney like Kevin Thorn will help you determine if you can qualify for OVDP and if this is the right option for you. Call today to schedule a consultation and learn more.


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