USDOJ: Tax Division: Offshore Compliance Initiative

One of the Tax Division's top litigation priorities is combatting the serious problem of non-compliance with our tax laws by U.S. taxpayers using secret offshore bank accounts. Increased technical sophistication of financial instruments and the widespread use of the internet have made it easy to move money around the world. According to a 2008 Senate report, the use of secret offshore accounts to evade U.S. taxes costs the Treasury at least $100 billion annually.

In recent years, the Tax Division, working closely with United States Attorneys' offices, has seen ground-breaking success in addressing the use of foreign financial accounts to evade United States taxes and reporting requirements. The division's current offshore program began in 2008, with the investigation of UBS AG, Switzerland's largest bank. As a result of that investigation, in February 2009, UBS entered into a deferred prosecution agreement (DPA) and admitted guilt on charges of conspiring to defraud the United States by impeding the IRS, exited the business of providing banking services to U.S. customers with undeclared accounts, and paid $780 million in fines, penalties, interest, and restitution. As part of the DPA and a 2009 agreement negotiated among the US, UBS, and the Swiss government to settle a civil summons enforcement proceeding brought by the Tax Division, the IRS has received account information about thousands of the most significant tax cheats among the U.S. taxpayers who maintain secret Swiss bank accounts.

In January 2013, the U.S. Attorney's Office in the Southern District of New York secured the guilty plea of Wegelin Bank, the oldest private bank in Switzerland and the first foreign bank to plead guilty to felony tax charges. The bank admitted to conspiring to defraud the United States by helping U.S. account holders hide assets from the IRS in undeclared accounts. A federal district court has also authorized the IRS to issue a "John Doe" summons that will allow the United States to determine the identity of U.S. taxpayers who may hold accounts at Wegelin and other banks based in Switzerland to evade federal income taxes.

The Tax Division has opened investigations into numerous additional offshore banks located in Switzerland, India, Israel and elsewhere. From 2008 through April 2013, the Tax Division has charged over 30 banking professionals and 60 account holders, thus far resulting in five convictions after trial and 55 guilty pleas, including 2 trial convictions and 16 guilty pleas in the first four months of 2013 alone.

These investigations are expanding into other countries. In April 2013, a federal district court authorized the IRS to issue a “John Doe” summons seeking information about U.S. taxpayers who may hold undeclared offshore accounts at CIBC FirstCaribbean International Bank (FCIB), a Barbados-based bank with branches across the Caribbean. The summons, issued to Wells Fargo N.A., seeks records of U.S. taxpayers and financial institutions that used FCIB’s United States correspondent account at Wells Fargo to evade taxes.

As the Division's investigations focus on an ever-widening circle of banks and others who would assist U.S. taxpayers in attempting to hide income and assets from the United States, those who would use secret offshore bank accounts are running out of places to hide. The Tax Division is committed to using every tool available in its efforts to identify, investigate, and prosecute these wrongdoers. For example, a growing number of district and circuit courts are upholding subpoenas to accountholders for foreign financial records over Fifth Amendment objections, based on the requirements under Title 31 that such records be maintained. Prosecutors have also made effective use of subpoenas on U.S.-based correspondent accounts of foreign banks to obtain vital evidence in tax prosecutions.

An essential part of the Tax Division's mission is to encourage voluntary compliance with the tax laws. In addition to the specific deterrence that results from the Division's enforcement efforts in connection with unreported foreign financial accounts, these prosecutions have triggered remarkable general deterrence. The publicity surrounding the Tax Division's enforcement efforts, operating alongside the Internal Revenue Service's Offshore Voluntary Disclosure Initiatives, have resulted in an unprecedented number of taxpayers - over 38,000 since 2009 – voluntarily disclosing to the IRS their previously hidden foreign accounts and agreeing to pay billions of dollars in back taxes, interest and penalties to the U.S. Treasury. As a result, these enforcement efforts not only remedy past wrongdoing, but also bring into the system tax revenue from taxpayers who become compliant going forward.

Offshore Compliance Initiative News
Indictments, Pleas, Sentencings, and
Other Developments

June 13, 2013
Wyoming Couple Indicted for Tax Evasion

April 30, 2013
Court Authorizes Service of John Doe Summons Seeking the Identities of U.S. Taxpayers with Offshore Accounts at CIBC FirstCaribbean International Bank

April 12, 2013
California Businesswoman Agrees to Plead Guilty to Conspiracy to Conceal Israeli Bank Accounts

April 12, 2013
Arizona Businessmen and California Attorney Convicted for Hiding Millions in Secret Foreign Bank Accounts at UBS AG and Pictet & CIE

March 4, 2013
Swiss Bank Sentenced in Manhattan Federal Court for Conspiring to Evade Taxes

February 27, 2013
Middlesex County, N.J. Man Admits Tax Evasion and Concealing $1.2M in Income in Undeclared Indian Bank Accounts

January 30, 2013
California Man Pleads Guilty to Failure to Report Foreign Bank Accounts at UBS

January 8, 2013
South Florida Woman Pleads Guilty to Failing to Disclose Income from Swiss Bank Accounts and Agrees to $21 Million Penalty

January 7, 2013
Somerset County, N.J., Man Pleads Guilty to Concealing Income from Undeclared Swiss And Indian Bank Accounts

January 3, 2013
Swiss Bank Pleads Guilty in New York City Federal Court to Conspiracy to Evade Taxes

July 30, 2012
California UBS Clients Sentenced to Prison for Hiding Assets in Secret Bank Accounts Around the World