At the present time the good people of the Swiss Federal Tax Administration are sorting out which of the thousands of requested names of US persons and account numbers with UBS will be turned over to the United States shortly in accordance with the U.S.-Swiss agreement.
In 2008 the Department of Justice and the Internal Revenue Service filed a court action in Federal District Court for the Southern District of Florida seeking to obtain information on UBS account holders through a John Doe summons. This led eventually to a February 2009 deferred prosecution agreement between the Department of Justice and UBS in which the bank accepted responsibility for a charge of conspiracy to defraud the United States admittedly perpetrated by its bankers and account managers. What some consider to be tantamount to a “slap on the wrist”,UBS agreed to pay $780 million in fines, penalties, interest, and restitution; close down its private wealth pitch to US persons from its foreign based executives and disclose the names of U.S. clients. The agreement requires UBS to present to the IRS the remaining 4,500 names of U.S. clients of UBS AG owning or having beneficial interests in Swiss Accounts. The US government is moving forward beyond the UBS scandal to pursue other jurisdictions which have bank secrecy rules which are utilized by US persons and others to avoid detection and to potential evade the payment of income tax.
The Internal Revenue Service has indicated that it will use more John Doe summonses to identify U.S. taxpayers and others who are using offshore accounts and entities in tax haven and bank secrecy jurisdictions to evade U.S. tax as well as failing to report foreign financial accounts under the FBAR reporting requirements. Under § 7609(f) , a so-called John Doe summons is one that does not identify the person under investigation. It may be issued after a federal magistrate or district court judge determines: (i) the summons relates to the investigation of a particular person or ascertainable group or class of persons, (ii) there is reason to believe that the person, group, or class may fail or may have failed to comply with the tax laws, and (iii) the information sought and the identity of the persons whose liability is involved cannot be readily obtained from other sources. See. e.g., US v. Samuels, Kramer & Co., 712 F2d 1342 (9th Cir. 1983) .
Whistleblowers have also played an important role in assisting the U.S. investigations of offshore accounts, both inside and outside UBS, including former UBS banker Bradley Birkenfeld. See §7623(b).
Under the limited amnesty program offered last year, it has been reported that 14,700 returns were filed under this special voluntary disclosure program for taxpayers with unreported income from offshore accounts. Under limited amnesty, taxpayers coming forward and reporting past omissions were required to pay either a 20% accuracy related penalty or a delinquency penalty on up to 6 years of non-compliance covered under the program plus a 20% penalty on the amount in the foreign bank account (FBAR penalties) in the year with the highest aggregate account or asset value, in lieu of all other applicable penalties.
It is presently uncertain as to how the IRS will generally treat those who decide to come forward and make a disclosure after the limited amnesty period has ended. The Service will obviously decide each of those disclosures on a case by case basis and decide which of the disclosures are appropriate for criminal prosecution as well. They already have.
More updates on this area in the future.