Pinter Bank Swells List of Foreign Banks To Which Enhanced OffShore Penalty Applies

Most U.S. taxpayers who enter the IRS Offshore Voluntary Disclosure Program must pay an offshore penalty equal to 27.5 percent of the highest year’s aggregate balance of their offshore accounts during an eight-year look-back period. On August 4, 2014, the IRS increased this penalty from 27.5% to 50% if the following conditions exist:

(1) At the time the taxpayer initiated their disclosure, one or more of the following applies:

a. A foreign financial institution at which the taxpayer had an account had been publicly identified as being under investigation, the recipient of a John Doe Summons or is cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement; or

b. A facilitator who helped the taxpayer establish or maintain an offshore account had been publicly identified as being under investigation, the recipient of a John Doe summons or is cooperating with a government investigation, including the execution of a deferred prosecution agreement or non-prosecution agreement.

On May 15, 2015, the Department of Justice announced that Finter Bank Zurich AG (Finter), located in Zurich, Switzerland, signed a non-prosecution agreement with the Department of Justice. Let’s take a moment to discuss non-prosecution agreements. A non-prosecution agreement provides a path for a foreign bank to resolve potential criminal liabilities with the United States government. The Swiss Bank Program, announced in August 2013, is an example of just such a non-prosecution agreement.

Under the program, Swiss banks must:

• Make a complete disclosure of their cross-border activities;
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
• Cooperate in treaty requests for account information;
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
• Pay appropriate penalties.

Banks meeting all of the above requirements are eligible for a non-prosecution agreement. On the other hand, banks that are already under criminal investigation related to their Swiss-banking activities — along with any individuals who work for that bank — are ineligible.

According to the terms of the U.S.-Finter non-prosecution agreement, Finter has agreed to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts, and pay a whopping $5.414 million penalty in return for the department’s agreement not to prosecute Finter for tax-related criminal offenses.

Since August 1, 2008, Finter has maintained 283 U.S.-related accounts with a maximum aggregate balance of nearly $235 million. According to a recent press release issued by the Department of Justice, Finter’s managers and employees aided and assisted U.S. clients in opening and maintaining undeclared accounts in Switzerland and hiding the assets and income they held in those accounts from the IRS. To add insult to injury, in the wake of UBS’s bombshell announcement that it was the target of a criminal investigation by the U.S., Finter accepted accounts from a mass exodus of U.S. accountholders who were beating down the doors of UBS to withdraw their money like a SWAT team beating down the door of America’s Most Wanted Fugitive at an ungodly hour of the night in order to avoid going down with a “sinking ship.”

What did Finter do to catch the ire of Uncle Sam? Finter allowed U.S. clients to eliminate the paper trail associated with their undeclared assets and income, including “hold mail” services and numbered and coded accounts. In addition, Finter assisted clients in using sham entities as nominee beneficial owners of undeclared accounts, solicited Forms W-8BEN that falsely stated under penalties of perjury that the sham entities beneficially owned the assets in the undeclared accounts, and provided cash cards and credit cards linked to the undeclared accounts.

What does this mean for a U.S. taxpayer with an undeclared Finter account? Such accountholders may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program. However, the price of admission has increased — dramatically. Instead of 27.5%, such taxpayers must now pay a 50% offshore penalty in order to seek shelter in the OVDP bunker. To eliminate any confusion, although a taxpayer with an unreported account at one of the banks mentioned on this dreadful list must pay a larger offshore penalty, that does not mean that he or she is automatically disqualified from participating in the Offshore Voluntary Disclosure Program. There are, however, separate requirements that a taxpayer must meet in order to be eligible to participate in the Offshore Voluntary Disclosure Program.

With the addition of Pinter Bank, the list of foreign banks to which the 50% offshore penalty applies has grown from fourteen to fifteen. If a U.S. taxpayer has an account with any one of the banks listed below, his or her offshore penalty within OVDP will automatically increase from 27.5% to 50% of whatever the highest year’s aggregate balance was during the eight-year look-back period. Unfortunately, the offshore penalty is not negotiable. To the extent that a taxpayer has already submitted his OVDP letter and attachments and now is having second thoughts about forking over such a large chunk of change, his only recourse is to “opt out” of OVDP.

Not surprisingly, Pinter is encouraging its U.S. accountholders to come into tax compliance and participate in the IRS Offshore Voluntary Disclosure Program. The bank must make a good faith effort in doing so in order to live up to its end of the bargain.

Below is the list:


2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.

3. Wegelin & Co.

4. Liechtensteinische Landesbank AG

5. Zurcher Kantonalbank

6. Swisspartners

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. HSBC India

10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).

11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)

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 (effective 12/22/14)

13. BSI SA (effective 3/30/15)

14. Vadian Bank AG (effective 5/8/15)

15. Finter Bank Zurich AG (effective 5/15/15)

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Original Post By:  Michael DeBlis

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.


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