The Swiss Bank Program: The Justice Department Announces Final Resolutions

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Jason B. Freeman

Jason B. Freeman

Managing Member

214.984.3410
jason@freemanlaw.com

Mr. Freeman is the founding member of Freeman Law, PLLC. He is a dual-credentialed attorney-CPA, author, law professor, and trial attorney.

Mr. Freeman has been named by Chambers & Partners as among the leading tax and litigation attorneys in the United States and to U.S. News and World Report’s Best Lawyers in America list. He is a former recipient of the American Bar Association’s “On the Rise – Top 40 Young Lawyers” in America award. Mr. Freeman was named the “Leading Tax Controversy Litigation Attorney of the Year” for the State of Texas for 2019 and 2020 by AI.

Mr. Freeman has been recognized multiple times by D Magazine , a D Magazine Partner service, as one of the Best Lawyers in Dallas, and as a Super Lawyer by Super Lawyers, a Thomson Reuters service. He has previously been recognized by Super Lawyers as a Top 100 Up-And-Coming Attorney in Texas.

Mr. Freeman currently serves as the chairman of the Texas Society of CPAs (TXCPA). He is a former chairman of the Dallas Society of CPAs (TXCPA-Dallas). Mr. Freeman also served multiple terms as the President of the North Texas chapter of the American Academy of Attorney-CPAs. He has been previously recognized as the Young CPA of the Year in the State of Texas (an award given to only one CPA in the state of Texas under 40).

The Justice Department recently announced that it has reached final resolutions under the Swiss Bank Program. The Program allowed cooperating Swiss banks to resolve their potential U.S. criminal liabilities and to cooperate in DOJ’s ongoing investigations into the use of foreign bank accounts by U.S. taxpayers to commit tax evasion.

The announcement marked the completion of the examination of Category 3 and 4 banks in the Swiss Bank Program.  The Program established four categories of Swiss financial institutions. Category 1 banks included Swiss banks already under investigation when the Program was announced—such “Category 1” banks were therefore not eligible to participate.  Category 2 was reserved for those banks that advised DOJ by Dec. 31, 2013 that they had reason to believe that they had committed tax-related criminal offenses in connection with undeclared U.S. related accounts.  Such qualifying and cooperating banks were eligible for non-prosecution agreements with DOJ.  The final Category 2 non-prosecution agreement was finalized in January of 2016, marking a total of 80 such agreements with Category 2 Banks under the program.

The most recent announcement deals with Category 3 and 4 banks.  Category 3 banks were those that established, with the assistance of an independent internal investigation of their cross-border business, that they did not commit tax or monetary transaction-related offenses and have an effective compliance program in place.  Among other things, Category 3 banks were required to provide information about their cross-border business, and to close accounts of accountholders who fail to come into compliance with U.S. reporting obligations.  Under the Program, compliant Category 3 banks received a non-target letter.

Category 4 of the Program was reserved for Swiss banks that were able to demonstrate that they met certain criteria for deemed-compliance under the Foreign Account Tax Compliance Act (FATCA).  Category 4 banks were also eligible for a non-target letter.  However, ultimately there were no Category 4 banks under the program.

Again, the announcement marks the completion of the final resolution under the Swiss Bank Program.  And DOJ and IRS officials, commenting on the resolutions, indicated that the government will be actively mining and building on the information it has received to continue—if not ramp up—its investigations into unreported or improperly reported foreign assets.

As DOJ announced, “[t]he completion of the resolutions with the banks that participated in the Swiss Bank Program is a landmark achievement in the Department’s ongoing efforts to combat offshore tax evasion.”  According to Principal Deputy Assistant Attorney General Caroline D. Ciraolo, “[the Department of Justice is] now in the legacy phase of the Program, in which the participating banks are cooperating, and will continue to cooperate, in all related civil and criminal proceedings and investigations.  The Tax Division, working closely with its colleagues throughout the Department and its partners within the Internal Revenue Service (IRS), will continue to hold financial institutions, professionals, and individual U.S. taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading U.S. tax obligations.”

IRS Large Business & International Division (LB&I) Commissioner Douglas O’Donnell further warned that the IRS is “evaluating incoming information to detect accountholders who have evaded reporting overseas assets and income, and we are using this information to further untangle the web of financial institutions and intermediaries helping with this evasion.  We have expanded our investigations to other regions of the world, and we will continue to apply these techniques to help protect honest taxpayers.”

Expect to see continued enforcement under the government’s foreign tax compliance initiatives, meaning more audit, investigations and prosecutions to come.

 

For more on international tax enforcement, see:

A Brave New World: The Panama Papers and the United States’ Role as a Tax Haven

The Panama Papers: The First U.S. Conviction for Tax Fraud

The Panama Papers: U.S. Accountant Pleads Guilty to Charges Related to Client’s Improper Filings

The Updated IRS Voluntary Disclosure Program

An Update onInternational Tax Enforcement

J5 Continues its Efforts to Identity International Tax Cheats

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