DOJ Offshore Compliance Initiative: Summary of Enforcement Activity To Date

The Department of Justice Tax Division, which is responsible for the criminal and civil enforcement of the tax laws, has created an “Offshore Compliance Initiative” which is focused on cracking down on offshore tax evasion by U.S. taxpayers using secret foreign bank accounts.  This initiative began with the landmark deferred prosecution agreement involving Swiss banking giant UBS AG announced in February 2009.  Since that time, the Tax Division has been aggresively investigating and prosecuting offshore tax evasion cases.  The “Offshore Compliance Initiative” maintains a frequently updated web page which summarizes the results of its efforts to date, as follows:

  • Approximately 150 investigations of offshore account holders are underway since 2009;
  • 49 account holders have been criminally charged;
  • 41 guilty pleas have been entered;
  • 3 individuals have been convicted after trial;
  • 5 individuals are awaiting trial;
  • A number of facilitators who helped clients hide assets offshore at UBS and other banks have been indicted, including 19 bankers and 2 attorneys;
  • Two bankers have entered guilty pleas;
  • The remaining bankers and attorneys are awaiting trial; and
  • 8 independent financial advisors have been charged, one of whom was convicted and the rest are awaiting trial.

The DOJ also reports that investigations have been opened into numerous additional offshore banks around the world, and that one bank has been indicted and has pleaded guilty.  The bank that has been indicted and pleaded guilty is Wegelin & Co., Switzerland’s oldest private bank.  On March 4, 2013, Wegelin was sentenced and ordered to pay approximately $58 million to the U.S. “for conspiring with U.S. taxpayers and others to hide approximately $1.5 billion in secret Swiss bank accounts, and the income generated in the accounts, from the Internal Revenue Service” (DOJ press release here).  The Justice Department press release further states that “[t]his case represents the first time that a foreign bank has been indicted for facilitating tax evasion by U.S. taxpayers and the first guilty plea and sentencing of such a bank.”

It has been widely reported in the media that the other foreign banks under investigation by the Justice Department consist of the following:  HSBC, Basler Kantonalbank, Zuercher Kantonalbank, Julius Baer, Bank Leumi, Bank Hapoalim, and Mizrahi-Tefahot Bank, Liechtensteinische Landesbank AG, and NZB AG.

What the DOJ omits from its summary is that the sentences in the criminal cases have largely been probation-only sentences, with very few judges requiring the defendants to serve jail time.  The most recent sentence, involving an 83 year old individual who maintained accounts at Credit Suisse and Wegelin & Co. in Switzerland, was handed down on March 5.  In that case, the district court imposed a sentence of six months of probation, including three months of home confinement, and a civil penalty of over $2.8 million.

In a subsequent post, we will address options for U.S. taxpayers with unreported offshore bank accounts, including the Internal Revenue Service’s Offshore Voluntary Disclosure Program.

3 thoughts on “DOJ Offshore Compliance Initiative: Summary of Enforcement Activity To Date

  1. Pingback: District Court Imposes Unusual Sentence in Latest UBS Criminal Case | Tax Controversy Watch

  2. Pingback: Federal Court Authorizes IRS to Serve “John Doe” Summons Regarding CIBC FirstCaribbean International Bank | Tax Controversy Watch

  3. Pingback: The Latest DOJ Offshore Enforcement Scorecard | Tax Controversy Watch

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