On October 13, 2014 Robert Wood published a fascinating post title: “100 Swiss Banks Get Ultimatum: Hand Over Americans Or Face U.S. Prosecution“. Mr. Wood is writing about the Swiss Banks who foolishly entered the “OVDP For Swiss Banks Program” that the Department of Justice announced in August of 2013. I have followed this topic with great interest: arguing that Swiss Banks should NOT have joined OVDP for Swiss Banks and that Americans in Switzerland should NOT join OVDP and take part in the FBAR Fundraiser.
Mr. Wood’s post demonstrates the pitfalls of entering into disclosure agreements with the U.S. Government. In this case (among other things) the U.S. is demanding that “Americans be handed over”. The reality is (as one commenter notes) that what the U.S. Government calls “Americans” the Swiss Government likely calls “Citizens of Switzerland”. Therefore, the U.S. is using the “OVDP for Swiss Banks Program” as a vehicle to force Switzerland to turn their own citizens over to the United States. Interesting. That said, every country that enters into a FATCA IGA (which is really an OVDP program for countries) has agreed to turn its own citizens over to the United States. For example, the “Alliance For The Defence of Canadian Sovereignty“, in it’s video of the FATCA proceedings in the Canadian House of Commons, describes July 1, 2014 as the day that “Canada begins to turn its citizens over to the United States”.
Robert Wood describes the demand to the Swiss Banks in the following way:
Now, from its position of dominance, the Justice Department has made it clear what it wants from the hundred Swiss banks that hurriedly grabbed the DOJ’s settlement deal before January 1, 2014. The U.S. seeks ‘total cooperation’, and that truly means total. Any American names, details, and more. The Justice Department intends to get it all. … (and later)
However, all banks must report to U.S. authorities any information or knowledge of activity relating to U.S. tax. They must reveal all cross-border activities and close the accounts of Americans evading taxes. The 3 tiers of penalties are vastly better than a full-blown U.S. investigation with potential tax evasion charges. Participating banks are required to provide details on American accounts.
In the same way that Americans abroad regret having entered the OVDI/OVDP programs I think the Swiss banks who entered OVDP for Swiss Banks now regret it.
How did we come to this? The answer is that some U.S. Homelanders used a limited number of Swiss banks to evade U.S. taxes. In other words, it was a small number of people who brought us to the point where Americans abroad are being forced to renounce their U.S. citizenship to survive.
But, all of that is old news. For Americans abroad their problems are NOT the state of their tax compliance. Their problem is that they are American.
Mr. Wood ends with some very interesting NEW news. He writes:
Meanwhile, the tax evasion trial of a key Swiss banker and former UBS high-flying executive, Raoul Weil, is commencing in Florida. It comes after a five year wait. Aptly, if he is convicted of helping Americans evade taxes, he could spend five years in jail. After all, if the last five years of IRS and DOJ success has shown anything, it is that the U.S. is all powerful and wants to make examples of high-flying individuals and institutions.
I had completely forgotten about Raoul Weil. Apparently his trial begins today October 14, 2014 in Florida. It will be very newsworthy.
Ex-UBS Banker Weil Says Trial Witnesses Fear Retribution http://t.co/H2O8EOrWAl via @BloombergNews
— U.S. Citizen Abroad (@USCitizenAbroad) October 13, 2014
What this Swiss banker could reveal at his trial http://t.co/8JSkaDedlE
— U.S. Citizen Abroad (@USCitizenAbroad) October 13, 2014
It will be fascinating. There are two stories being developed:
Story 1 – The Defendant Is Alleged To Have Helped U.S. Citizens Evade U.S. Taxes
Story 2 – How Raoul Weil Finds Himself Standing Trial In The United States To Begin With
Each story has its own narrative. Each story is important. I came across the following post at International Man about the second story.
@USCitizenAbroad What the world looks like when non-violent political offenses (like Weil's) become extraditable. http://t.co/mNU8Uh4m8M
— International Man (@intlmandotcom) October 14, 2014
The article referenced in the above tweet is thought provoking. It begins with:
Though it seems farfetched, the prospect of being extradited to North Korea is a chilling thought.
Consider the thought experiment below and see if a similar scenario is as implausible as it initially sounds.
Suppose you are on vacation with your family in China, doing typical tourist things: checking out the Forbidden City, Tiananmen Square, and the Great Wall. However, about five years ago you had made a couple of viral YouTube videos poking fun and making jokes about the North Koreans—particularly their deceased Dear Leader Kim Jong-il. The North Koreans, however, were not amused at all. And despite years passing, they have not forgotten nor forgiven. Insulting the North Korean government and especially the Dear Leader is deemed a very serious “crime.”
The North Korean authorities have charged you with a crime and declared you a fugitive from justice—facing many years in prison. They also put out an international arrest warrant.
When they found out you had checked into a hotel in China—a country which they have good relations with—they sprang into action. An official request was made to extradite you from China to face trial in North Korea.
The Chinese, treaty-bound and respecting the wishes of their ally, oblige.
Then, at 2 in the morning, you’re violently awakened as a squad of heavily armed Chinese police break into your hotel room, point loaded guns at you and your family, and haul you away in your pajamas. After some brief formalities in a Chinese kangaroo court, you’re taken to a jet bound for Pyongyang, where you are promptly convicted by another kangaroo court and thrown into a North Korean prison. The end.
This made-up story is what the world could look like if the international norm of not extraditing people for political “crimes” continues to be eroded.
You will find the complete article (which I highly recommend) here.
@Trica- the point about having IBS as an SSL website is that everything sent to the blog is encrypted. The use of the site via HTTPS versus HTTP is transparent to us users but the key difference is that currently all usernames and emails and the actual posts are sent to the site in the clear – so a third party could easily intercept this information. This makes it easy to impersonate another blogger. As someone who works in this area professionally I recommend that IBS change to a secure https SSL site.
What is the claim against Raoul Weil? Did he break the laws of Switzerland? No. Did he break international law? What law? He provided banking services. I am trying to think of an analogy. If a gun dealer sold a gun to a person and that person committed a crime is the gun dealer guilty of that crime? Answer: no. The bank is not guilty but the US person who evaded tax and FBAR reporting.
The article talks about numbered bank accounts and in fictitious names to hide the identity of the account owners – this is what the Swiss do. But no mention of the bankers of Delaware who offer the same services for overseas entities/persons.
@JC
Drug dealers are also arrested. UBS broke american law by going to America and targeting customers there- not in Switzerland, stupidly. So American laws were broken in America.
But yeah- I would wish that the hypocrisy would be allowed in court as well. Usually it is not.
@Polly, yes if they traveled to the USA and broke USA laws whilst in the USA they should be prosecuted.
“Part of being a nice Canadian?” Puhleez. Such deceit and manipulation by those trying to manipulate Brockers to a adopt their POV should be saved for their enemies, unless of course we are. It’s offensive, in the truest sense of the word.
@Polly
The NSA doesn’t surveil it’s citizens. Of course they’ll pick over everyone to make sure they don’t! 😉
@MonaLisa
What happened to you was what prompted us to have to deal with this in the first place. I remember emailing admins of other sites explaining what was happening and asking if they could remove those vicious comments. Fortunately, that seems to have stopoed .
@Steve
My response re: SSL was only in reference to what Anonymous was saying.
@USX
We agree on something. God Save the Queen!
@JC
I think, without re-reading all at once, that what Mr. Weil did was rather more involved than simply being a banker. I am not at all into defending the US against their assault on Americans abroad. But there are people in the world who are intentionally evading tax and the people who help them do it. The actions of these people are the source of our misery. On one level, more than any other group of people, we are the ones who would be most likely to want to see people like Mr. Weil caught and punished. That is what would really put an end to all of this.
In a recent discussion with a long time (40 year) US citizen living in SE Asia when discussing CBT,FATCA and FBAR…his reaction…”I am not disclosing”. The vast majority of his assets are now in his non US citizen partner’s name( with all of the potential complications that brings). In another discussion with a naturalized US citizen (dual) living in his home country in SE Asia … his reaction..”I am now a monk. I own nothing and I file1040 Eazy returns with the IRS (all his assets and bank accounts are in his non US citizen’s wife’s name). In effect, these people are self relinquishing their US citizenship. They are giving the US something to file, but their real assets are held by their non US citizen wife or girlfriend.
@Steve, all fine as long as they stay together!
@Tricia, I remember and will always appreciate that. 🙂
It is my understanding that many of the bankers actually travelled to the US. This changes the ballgame considerably.
http://www.whistleblowers.org/storage/whistleblowers/documents/Birkenfeld/full_exhibit_c_to_deferred_prosecution_agreement.pdf
4.C. Additionally, said private bankers and managers would actively assist or otherwise facilitate
certain undeclared U.S. taxpayers, who such private baners and managers knew or should
have known were evading United States taxes, by meeting with such clients in the United
States and communicating with them via U.S. jurisdictional means on a regular and
recurng basis with respect to their UBS undeclared accounts. This enabled the U.S.
clients to conceal from the IRS the active trading of securities held in such accounts and/or
the making of payments and/or asset transfers to or from such accounts. Certain vas
executives and managers who knew of the conduct described in this paragraph continued to
operate and expand the U.S. cross-border business because of its profitabilty. It was not
until August 2007 that executives and managers made a decision to wind down the U.S.
cross-border business. Executives and managers delayed this decision due to concerns that
it would be costly, that it was not likely a third pary buyer of the business could be found,
and it could damage UBS’s business reputation.
-2-
http://www.bloomberg.com/news/2014-10-14/ex-ubs-banker-weil-knew-nothing-of-tax-plot-jurors-told.html
In the Weil case, prosecutors allege that 60 private bankers he supervised came to the U.S. to give unlicensed-banking and investment-advisory services to American clients. They cloaked their activities through dummy corporations and numbered accounts and used encrypted laptops and other counter-surveillance techniques, according to the U.S.
A list of some of the major players:
http://www.bloomberg.com/news/2011-03-30/offshore-tax-crimes-scorecard-bankers-clients-at-ubs-correct-.html
@Steve,
That is truly sad. Can they not afford to renounce?
One question though. Do they not worry about being questioned as to why they have no assets? Moving them, I understand but the IRS would see that as a willful action. Perhaps minnows but curious from a technical point of view.
@ Dax
Thanks for sharing this. Was this a Cdn bank, one of the “big 5”? Please let us know; I’m sure others of us with US birthplaces may experience this along the next few months.
@Dax @LM
I cannot believe the bank official gave you a waiver after you showed your CLN. Any chance you think he/she didn’t understand what is supposed to happen?
Good for you for refusing to sign that waiver, the W8BEN and to offer to close your account. Banks hate to lose money. 🙂
@badger
“Of course, most practitioners do not think the IRS will “willy-nilly” ignore their own FAQs procedures for taxpayers who file under the SFCP (at least not across the board); lest taxpayers lose confidence in the IRS.”
What stupidity. After the FAQ35 debacle of 2009? Are they kidding?
http://tax-expatriation.com/2014/10/14/irs-releases-clarifying-rules-for-u-s-citizens-living-outside-the-u-s-re-streamlined-filing-guidance/
DAX, LM and Tricia,
We should all be prepared to take the same steps as smart DAX if our bank hands us that document to sign when we have shown our hard-won Certificates of Loss of Nationality. Refuse to sign and offer to close all of our accounts!!
@ Tricia
Looking over the Bloomberg article which names all the “fatcats” that recently have been charged/indited, it is interesting to see what fines/penalties these guys got for the clearly iliegal activities they knew they were perpetrating.
Some cooperated with the feds/courts, plead guilty, paid their back taxes and got probation; some were charged varying levels of fines (I suppose in addition to back taxes) and await sentencing. But some, it seems, were sentenced to periods of “home detention” or “community service”. Or shorter sentences for ratting out others. In some of these cases the fines seem (given their wealth and clear willfulness) pretty minimal, certainly less than what is being threatened for expats who didn’t file FBARs because they weren’t aware that FBAR filing was required.
So this is US justice in action?!?!?
@Dax
Not sure if you are in Switzerland, but the category 2 banks there have signed a ‘non prosecution’ agreement with the US called the joint statement. It lets them off prosecution but gives them a fine (withhold) for any ‘non compliant’ US persons who had accounts with them from 2008 onwards. This means they have to ferret out any US persons past or present on their books and ‘prove’ to the US that these accounts were ‘compliant’ . This is a problem for them if their ‘US persons’ are now EX US persons, so they either try to get you to sign the privacy waiver on the hope that you will give up your hard won privacy rights OR they can ask you to show compliance with proof of past FBAR filings, (which is what I did).
If you are not in Switzerland then I fail to see why they want you to sign a waiver with a CLN, unless it is because of your refusal to sign a W8BEN, this states that you are NOT subject to US tax and they will merely keep this on record at the bank.
@ Calgary411
I’ve mentioned this before, but the W8BEN is a US form that has ABSOLUTELY no legal place in Canada. If the bank wants to create it’s own form for a client to sign to legally document TO THE BANK that they are not US citizens, so be it. But for the bank to demand that a customer sign a US-IRS form on Canadian soil and within Canadian boundries is absolutely outrageous. Under what law must a Cdn customer be required to sign a US legal document at their Canadian bank to indicate (TO THE ADMINISTRATION OF THEIR FINANCIAL INSTITUTION) that they are NOT a US Person?????
@LM
I understand what you are saying and agree with you, but in Switzerland the US banks are all s**t scared and if you don’t sign the W8BEN or their equivalent THEY close your account and there are no alternatives like credit unions.
@LM, I agree with you entirely about the W8BEN. A Canadian bank has no business asking a customer to sign it, especially if the customer has a CLN from the U.S.
@Polly and @Bubblebustin, about NSA surveillance of U.S. citizens: As you probably know, the U.S., Britain, Canada and Australia (and maybe New Zealand too) have long-standing agreements to share intelligence data with one another. I think they have all gotten around domestic laws against spying on their own citizens by letting others in the group do the spying for them. Of course, Snowden’s revelations indicate that they don’t always obey their own laws, either.
@LM
Unfortunately, I am pretty sure it is in the IGA. I will check. If so, another one of the handovers of sovereignty thanks to our MPs.
Yep, beginning on page 21; regardless of which indicia, the W-8 form is mentioned each time.
ANNEX I
DUE DILIGENCE OBLIGATIONS FOR IDENTIFYING AND REPORTING ON U.S.
REPORTABLE ACCOUNTS AND ON PAYMENTS TO CERTAIN
NONPARTICIPATING FINANCIAL INSTITUTIONS
II. Preexisting Individual Accounts. The following rules and procedures apply for
purposes of identifying U.S. Reportable Accounts among Preexisting Accounts held by
individuals (“Preexisting Individual Accounts”).
4. Notwithstanding a finding of U.S. indicia under subparagraph B(1) of this
section, a Reporting Canadian Financial Institution is not required to treat
an account as a U.S. Reportable Account if:
a) Where the Account Holder information unambiguously indicates a
U.S. place of birth, the Reporting Canadian Financial Institution
obtains, or has previously reviewed and maintains a record of:
(1) A self-certification that the Account Holder is neither a
U.S. citizen nor a U.S. resident for tax purposes (which
may be on an IRS Form W-8 or other similar agreed form);
(2) A non-U.S. passport or other government-issued
identification evidencing the Account Holder’s citizenship
or nationality in a country other than the United States; and
(3) A copy of the Account Holder’s Certificate of Loss of
Nationality of the United States or a reasonable explanation
of:
(a) The reason the Account Holder does not have such a
certificate despite relinquishing U.S. citizenship; or
(b) The reason the Account Holder did not obtain U.S.
citizenship at birth.
************************
other indicia:
) A self-certification that the Account Holder is neither a
U.S. citizen nor a U.S. resident for tax purposes (which
may be on an IRS Form W-8 or other similar agreed form);
and
(2) Documentary evidence, as defined in paragraph D of
section VI of this Annex I, establishing the Account
Holder’s non-U.S. status.
******************
p 37
D. Documentary Evidence. For purposes of this Annex I, acceptable documentary
evidence includes any of the following:
1) A certificate of residence issued by an authorized government body (for
example, a government or agency thereof, or a municipality) of the
jurisdiction in which the payee claims to be a resident.
2) With respect to an individual, any valid identification issued by an
authorized government body (for example, a government or agency
thereof, or a municipality), that includes the individual’s name and is
typically used for identification purposes
3) With respect to an Entity, any official documentation issued by an
authorized government body (for example, a government or agency
thereof, or a municipality) that includes the name of the Entity and either
the address of its principal office in the jurisdiction (or U.S. Territory) in
which it claims to be a resident or the jurisdiction (or U.S. Territory) in
which the Entity was incorporated or organized.
4) With respect to a Financial Account maintained in a jurisdiction with anti-
money laundering rules that have been approved by the IRS in connection
with a QI agreement (as described in relevant U.S. Treasury Regulations),
any of the documents, other than a Form W-8 or W-9, referenced in the
jurisdiction’s attachment to the QI agreement for identifying individuals or
Entities.
5) Any financial statement, third-party credit report, bankruptcy filing, or
U.S. Securities and Exchange Commission report.
http://www.fin.gc.ca/treaties-conventions/pdf/FATCA-eng.pdf
@LM
First off, I think American jails are too full to accept tax evaders too right now. Besides that would just cost the taxpayer more to feed them etc. 🙂
But I too wondered about some of the penalties listed there. I expected to see 50% on each hidden account they found and dont understand why some were seemingly charged so little?
@LM
I should probably put that link on the new post about Allison Christians’ article about time to fix FBAR., What a contrast between these people and us.
@ Tricia Moon: the US born expat has only the US passport and is a permanent resident. He cannot renounce as he has no other passport (in SE Asia with the exception of Singapore it is very difficult to get citizenship in your country of residence so he cannot renounce. The other could renounce but decided not to for the time being given the political turmoil in his home country he is using the US passport as a worst case escape path. Neither have US based assets – and yes, these are but two examples – there are many cases like this – admitted to no one except close friends- if the marriage or partnership breaks the assets will surely be lost by the US Person with little real recourse.