The Department of Justice has released the signed Non-Prosecution Agreement NPA) with Swiss bank BSI SA. The Non-Prosecution Agreement is likely the precursor to enhanced enforcement efforts by the DOJ and IRS against those taxpayers who have not yet come forward and disclosed previously unreported offshore accounts. The DOJ has publicly stated that it will treat recalcitrant (non-reporters) and/or leavers (those taxpayers who have closed account only t move funds to another offshore bank) as “Willful” and therefore assess maximum civil and possibly criminal penalties under the Internal Revenue Code (IRC) and the Bank Secrecy Act (BSA).
Among the penalties under the IRC is a 75% civil fraud penalty on unreported income and among the penalties under the BSA is the civil penalty for failure to file a Report of Foreign Financial Account (FBAR) of the greater of $100,00 or 50% of the highest annual account balance for up to sic years. Other penalties may also apply.
The NPA provides in part as follows:
“In recognition of the conduct described in this Agreement and in accordance with the terms of the Swiss Bank Program, BSI agrees to pay the sum of $211 million as a penalty to the Department of Justice (“the Department”).”
“The Department enters into this Agreement based, in part, on the following Swiss Bank Program factors:
(a) BSI’S timely, voluntary, and thorough disclosure of its conduct, including:how its cross-border business for U.S. Related Accounts was structured, operated,and supervised (including internal reporting and other communications with and among management);
• the name and function of the individuals who structured, operated, or supervised the cross-border business for U.S. Related Accounts during the Applicable Period;
• how BSI attracted and serviced account holders; and
• an in-person presentation and documentation, properly translated, supporting the disclosure of the above information and other information that was requested by the Tax Division;
BSI has agree to provide the DOJ with:
“all necessary information and assist the United States with the drafting of treaty requests seeking account information of U.S. Related Accounts, whether open or closed, and collect and maintain all records that are potentially responsive to such treaty requests in order to facilitate a prompt response; (c) assist the Department or any designated federal law enforcement agency in any investigation, prosecution, or civil proceeding arising out of or related to the conduct covered by this Agreement by providing logistical and technical support for any meeting, interview, federal grand jury proceeding, or any federal trial or other federal court proceeding”
The IRS still offers taxpayers the opportunity to come forward through a variety of programs, including, the Offshore Voluntary Disclosure program. To determine which approach is correct taxpayer need to make a full and complete disclosure to an attorney skilled in the subject so that the Attorney- Client Privilege can protect the disclosure and a thorough analysis of the facts and law can be prepared.
We at MillarLaw routinely advise clients on their reporting and disclosure options and are able to provide highly professional advice in the area.