Spilling The Beans – Advisors Turning in Clients With Offshore Accounts

Swiss bank employees handing over US Depositor information to the United States.My earlier blog post predicts that foreign banks will tell all in order to avoid criminal prosecution for aiding tax evasion. Not only will the foreign banks tell all – it looks like personal financial advisors will be getting in on the act, too. Evidence of this can be gleaned from a recent article published by the Wall Street Journal (August 23, 2013), “Offshore-Adviser Plea Marks a Shift in Tax Crackdown”.

Laura Saunders, the author, believes that a recent guilty plea by a high-level Swiss adviser who helped United States taxpayers hide money overseas indicates a shift toward a new phase of the US Government’s campaign against undisclosed offshore holdings. The Government is making deals with the advisors who are willing to spill the beans. This latest tactic obviously gives the Government yet another very powerful weapon in its stockpile to combat offshore tax evasion.

A chart summarizing significant statistics about offshore account cases also accompanied Ms. Saunder’s article. It is quite revealing and is reproduced below. The numbers clearly demonstrate the IRS has hit the penalty jackpot by relentlessly pursuing undeclared foreign accounts. With all the penalty money coming at a time when the US debt is spiraling out of control, it is unfathomable that the Government will not do all in its power to keep riding this tidal wave of greenbacks. The statistics demonstrate that more US taxpayers have been criminally charged since 2009 than the number of taxpayers who have pled guilty or suffered a guilty verdict. The pressure is on and it looks more than likely that the number of pleas or verdicts will just continue to climb as the IRS keeps learning more and more.

The Numbers Tell a Story

Since 2009, U.S. officials have cracked down on undeclared offshore accounts.

• U.S. taxpayers criminally charged: 86

• Firms or advisers criminally charged: 35

• Guilty pleas: 64

• Guilty verdicts: 10

• Average account balance at its peak: $6.8 million*

• Participants in IRS offshore limited-amnesty program: More than 38,000

• IRS collections from limited-amnesty program: $5.5 billion, with $5 billion more to come

*Excludes some atypical cases

Sources: Jack Townsend, Federal Tax Crimes; IRS; Bryan Skarlatos, Kostelanetz & Fink

Get Advice and Take Action Now

For those with hidden accounts, complacency is not the order of the day! The IRS is continuously gathering information and names of account holders from foreign banks. In addition, the names of advisors, bankers and other “facilitators” must be revealed by those entering the IRS Offshore Voluntary Disclosure Program (OVDP) by way of detailed questions submitted in an attachment that is sent in the early stages of joining the program. It is predicted that when these advisors are contacted by the Department of Justice, they will give up any information about their clients in exchange for a plea deal. For any account holders whose names have been turned over to the IRS, it will already be too late to enter the OVDP.

So, what should you do? First, you need to get appropriate advice. Remember that an attorney is not treated the same as an accountant or other type of advisor. A special privilege is accorded when attorneys are consulted. Discussion with legal counsel may be protected by what is called the “attorney-client privilege.” Taxpayers with unreported income or assets must obtain a full understanding of the implications, their options for dealing with the matter and possible penalties under each option. They should discuss the matter with an experienced US tax attorney. This is particularly important if the taxpayer ultimately decides not to make the disclosure to the IRS. In contrast, a consultation with a non-attorney (for example, with the taxpayer’s accountant) is not protected by the privilege. If the IRS discovers the foreign financial account, the taxpayer’s accountant or other non-attorney could become a witness for the IRS against the taxpayer or be required to turn over records and documents. This would not be the case if an attorney had been consulted.


Virginia La Torre Jeker J.D., has been a member of the New York Bar since 1984 and is also admitted to practice before the United States Tax Court. She has 30 years of experience specializing in US and international tax planning as well as international commercial transactions. She has been based in Dubai since 2001; prior to that time she worked in Hong Kong for 15 years as a US tax consultant for international law firms, major banks (including HSBC) international accounting firms (Deloitte) and trust companies. Early in her career she worked in New York with the top-tier international law firm, Willkie Farr & Gallagher.

Virginia is regularly asked to speak at numerous conferences and seminars for various institutes and commercial organizations; publishes a vast array of scholarly works in her area of expertise, been interviewed by CNN and is regularly quoted (or has her articles featured) in local and international publications. She was recently appointed to the Professional Tax Advisory Council, American Citizens Abroad, Geneva, Switzerland. She was a guest lecturer at the University of Hong Kong, LL.M Program (Law Department) and served as an adjunct Business Law professor at the American University of Dubai and at the American University of Sharjah where she also taught the legal / ethical aspects of internet law and internet based transactions.


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