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Offshore accounts: guilty plea from Swiss bank shows new reality

On the second business day of the new year, a guilty plea in federal court served notice once again of how much the game has changed in the regulation of foreign bank accounts. Under pressure from U.S. authorities, the oldest private bank in Switzerland, Wegelin & Co., pleaded guilty to assisting Americans with tax evasion.

The guilty plea to one count of conspiracy was submitted by the bank's managing partner. It came in federal court in New York. The plea deal has important ramifications for taxpayers in Miami and throughout South Florida who seek to avoid trouble with the IRS or the specter of criminal charges from federal prosecutors concerning the taxation of offshore accounts.

Wegelin & Co. admitted that for about eight years, from 2002 to 2010, the bank had cooperated with U.S. taxpayers who filed false tax returns. Though the bank has not yet been sentenced, it has already agreed to pay $20 million in restitution to the U.S. The bank will also pay a fine of $22 million and forfeit $15.8 million in fees.

Tax attorneys followed the case closely and are taking note of its outcome. The resolution seemed to mark a significant milestone for the U.S. government in its efforts to extend the reach of American tax law. Federal prosecutors were able to obtain a guilty plea and impose serious consequences on a foreign bank that had no physical branches in the U.S.

To be sure, the IRS has long asserted the responsibility of Americans with foreign accounts to file the FBAR form for foreign bank account reporting. And the Foreign Account Tax Compliance Act (FATCA) is expected to extend the reach of U.S. authorities even more.

But the multi-million dollar consequences for a respected foreign bank in this criminal case show just how real the changes in foreign account compliance have become.

Source: "Swiss Bank Wegelin & Co. Pleads Guilty in U.S. Tax Probe," Bloomberg, Bob Van Voris & David Voreacros, 1-4-13

Our firm handles situations similar to those discussed in this post. To learn more about our practice, please visit our page on offshore bank accounts.

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