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The Swiss Bank Program is Winding Down

Offshore Account Update

Posted on February 24, 2017 |

The Internal Revenue Service and the Department of Justice have been working hard to crack down on tax evasion. U.S. affiliated individuals and business entities are supposed to report the existence of all offshore accounts and are required to pay taxes on offshore income. For a long time, the Swiss banking industry made it easy for U.S. investors not to comply with the rules. However, after diplomatic negotiations with Switzerland, a program called the Swiss Bank Program was launched to ensure U.S. taxing authorities could get the information needed to find tax evaders.

The Swiss Bank Program has been a tremendous success for taxing authorities, and has had a detrimental impact on banking privacy. The program is coming to an end, but this does not mean those with offshore funds are off the hook. Banks which took part in the Swiss Bank Program are now in legacy mode and continuing to cooperate with authorities. If you are concerned that your bank may have provided your financial information to the U.S. government, it is imperative you talk with a Boston tax law firm to find out what options may be available to try to minimize civil penalties and avoid criminal prosecution.

The Swiss Bank Program Comes to a Close

The Swiss Bank Program gave certain Swiss financial institutions the chance to come forward voluntarily and provide information on tax evasion to the Department of Justice. Banks could pay a fine, would be required to offer details on accountholders, but would not face criminal prosecution if they willingly came forward.

Only certain banks were eligible to participate in the Swiss Bank Program. Banks were divided into categories. The 14 banks in Category 1 were already being investigated and thus could not participate in the Swiss Bank Program. Four banks and one banking cooperative were classified as Category 3 banks between July and December of 2016. These banks showed they hadn't facilitated tax evasion and got acknowledgement of this from the Department of Justice. 

There was also a large group of Category 2 banks. These were the banks which had helped investors to hide their offshore accounts. These banks were the ones who came forward to avoid criminal prosecution by giving up details on their customers. In total, 80 different Swiss Banks fell within Category 2. These banks paid an average $17 million each in penalties, and the Department of Justice collected more than $1.6 billion in total from Category 2 banks.

Taxing authorities will now rely on the information from these financial institutions to pursue criminal and civil actions against the investors who held their funds offshore. The end of the Swiss Bank program does not mean the individual investors are now safe... it just means all the banks have given up their information for taxing authorities to use against investors. If you are concerned about what it could mean for you to have the government given your account details, you should talk with Kevin Thorn today about what options you may have available to try to protect yourself from penalty.

For a consultation, contact Kevin E. Thorn, Managing Partner, at ket@thornlawgroup.com or (617) 692-2989

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