The U.S. Government is stepping up its efforts against secret foreign accounts and offshore tax fraud. On February 2, 2012, the Department of Justice announced that Wegelin & Co., the oldest Swiss private bank, was indicted for conspiring with U.S. taxpayers and others to hide more than $1.2 billion in secret accounts and the income these accounts generated from the Internal Revenue Service. This is the first time an overseas bank has been charged by the United States for facilitating tax fraud by U.S. taxpayers. The U.S. government also seized more than $16 million from Wegelin’s correspondent bank account in the United States, in accordance with a civil forfeiture complaint and seizure warrant. Wegelin is charged in a superseding indictment with Michael Berlinka, Urs Frei and Roger Keller, three private client advisers at the bank who were previously charged with the same conspiracy.
The U.S. government accuses Wegelin, acting through Berlinka, Frei, Keller and/or others, with the following:
- Opening and servicing undeclared accounts for U.S. taxpayer-clients in the names of sham corporations and foundations formed under the laws of Liechtenstein, Panama, Hong Kong and other jurisdictions for the purpose of concealing some clients’ identities from the IRS;
- Accepting, as part of Wegelin’s client files, documents that falsely declared that the sham entities were the beneficial owners of certain accounts, when in fact the accounts were owned by U.S. taxpayers;
- Permitting certain U.S. taxpayer-clients to open and maintain undeclared accounts at Wegelin using code names and numbers to minimize references to the actual names of the U.S. taxpayers on Swiss bank documents;
- Ensuring that account statements and other mail for U.S. taxpayer-clients were not mailed to them in the United States;
- Communicating with some U.S. taxpayer-clients using their personal email accounts to reduce the risk of detection by law enforcement; and
- Issuing checks drawn on, and executing wire transfers through, its U.S. correspondent bank account for the benefit of U.S. taxpayers with undeclared accounts at Wegelin and at least two other Swiss banks. In doing so, the bank sometimes separated the transactions into batches of checks or multiple wire transfers in amounts that were less than $10,000 to reduce the risk that the IRS would detect the undeclared accounts.
The case was filed in the U.S. District Court for the Southern District of New York. Wegelin is faces a fine of the greatest of $500,000, or twice the gross gain derived from the offense or twice the gross loss to the victims. Berlinka, Frei, and Kelle face a maximum term of five years in prison, a maximum term of three years of supervised release and a fine of the greatest of $250,000, or twice the gross gain derived from the offense or twice the gross loss to the victims.
In another recent new development, the Swiss Finance Ministry said on January 31st that it handed over a few days ago secret banking data related to tax investigations to the U.S. Approximately 20,000 pages of encrypted data on Swiss banking practices, clientele and employees in the U.S. The key to unlocking the encrypted information, however, remains in the hands of the Swiss, said Eveline Widmer-Schlumpf, the Swiss finance minister. The Swiss insist that in order to obtain unencrypted data, they would like to reach a comprehensive bilateral solution with the U.S. and ensure that before the data is provided two conditions are met: (1) a request must be made pursuant to double taxation treaties; and (2) the individual named must have violated Swiss law.
With the government increasing its efforts to fight offshore tax evasion, taxpayers with foreign bank accounts are advised to consult with knowledgeable tax counsel. Former IRS Trial Attorneys of Holtz, Slavett & Drabkin are available to assist you with the issues related to offshore assets and foreign accounts. To arrange for a consultations, please contact us at (310) 550-6200.
Copyright (c) 2012 Igor S. Drabkin. All Rights Reserved.