IRS CI Fiscal Year 2014 Annual Business Report - More Convictions & More Jail Time!

Richard Weber, Chief, IRS Criminal Investigation - There is no doubt that we have had to be creative to overcome some of the budget challenges this year.

But in so doing, we maintained a steady focus on what is important. Our highest priority is to enforce our country’s tax laws and support tax administration to ensure compliance with the law and combat fraud.

This annual report includes case summaries that represent the diversity and complexity of those

investigations such as tax-related identity theft, money laundering, public corruption and terrorist

financing. Our cases touched almost every part of the world.

They had a significant impact on tax administration and were some of the most successful in the history of CI. Some of the biggest stories of the year included:

• Credit Suisse,
• Bank Leumi,
• BNP Paribas,
• Liberty Reserve,
• Silk Road and
• Gerald Poynter.

In the largest criminal tax case ever filed, Credit Suisse pleaded guilty to conspiracy to aid and

assist U.S. taxpayers in filing false income tax returns and agreed to pay a total of $2.6 billion.

Following the Credit Suisse investigation, IRS-CI led the case against Bank Leumi Group, a major Israeli international bank that admitted conspiring to aid and assist U.S. taxpayers to prepare and present false tax returns.

This unprecedented agreement marks the first time an Israeli bank has admitted to such criminal conduct. Bank Leumi Group will pay the U.S. a total of $270 million and cease to provide banking and investment services for all accounts held or beneficially owned by U.S. taxpayers.

BNP Paribas was the largest prosecution ever brought against a financial institution and one of the most significant criminal prosecutions of sanction evasion in U.S. history. Using our unique investigative skills, IRS-CI worked hard to protect the integrity of our financial system.

Liberty Reserve, one of the World's largest digital currency companies, and seven of its principals and employees were indicted for allegedly running a $6 billion money laundering scheme. Ross William Ulbricht, creator and owner of "Silk Road" website was indicted on charges of engaging in a continuing criminal enterprise, money laundering and other federal charges. Silk Road was used by more than 100,000 users to buy and sell illegal drugs and other unlawful goods and services. IRS-CI also worked significant tax investigations which are document in this annual report.

For example, Gerald A. Poynter was sentenced to 156 months in prison and ordered to pay $951,930 in restitution for filing fraudulent tax returns and attempting to receive nearly $100 million in fraudulent refunds from the IRS. Paul M. Daugerdas was sentenced to 180 months in prison, ordered to pay restitution to the IRS of $371,006,397 and ordered to forfeit $164,737,500 in proceeds for conspiring to defraud the IRS, to evade taxes, commit mail and wire fraud, and corruptly endeavoring to obstruct and impede the internal revenue laws. The 20-year scheme generated over $7

billion of fraudulent tax losses and yielded approximately $95 million in fees to Daugerdas personally.

We also continued to make tremendous headway with some of the most significant identity theft cases to date. Mauricio Warner was sentenced to 240 months in prison and ordered to pay $5 million in restitution after he was convicted of wire fraud, aggravated identity theft, filing false claims, and money laundering.

Ogiesoba Osula was sentenced to 210 months in prison and ordered to pay $15.9 million in restitution

after he was convicted for various fraud schemes including aggravated identity theft. And Arthur

Grigorian, Ernest Soloian and Hovhannes Harutyunyan and 51 other defendants were indicted for theft of over 2000 identities and refund claims of over $20 million dollars.

The budget challenges facing our agency are nothing new. In the past five years, CI’s staff has been

reduced approximately 11 percent bringing staffing to 1970’s levels. This trend cannot continue. I’m proud of this agency and the reputation that we have earned as the best financial investigators in the world.

Looking ahead to Fiscal Year 2015, we will continue to build an agency that has the tools and expertise to enforce our nation’s tax laws. We will not lose sight of taking care of our people and will continue to push initiatives with that in mind to include developing leadership candidates, improving employee satisfaction and engagement, investing in technology, and improving communication and transparency.

Through strategic investments in people, increased communication, enhanced technology, and

collaboration with domestic and global law enforcement partners, CI will continue to be the worldwide leader in tax and financial investigations.

Criminal Investigation’s highest priority is to enforce our country’s tax laws and support tax administration.

The Fiscal Year 2014 investigative priorities were:

· Identity Theft Fraud

· Return Preparer Fraud & Questionable Refund Fraud

· International Tax Fraud

· Fraud Referral Program

· Political/Public Corruption

· Organized Crime Drug Enforcement Task Force (OCDETF)

· Bank Secrecy Act and Suspicious Activity Report (SAR) Review Teams

· Asset Forfeiture

· Voluntary Disclosure Program

· Counterterrorism and Sovereign Citizens

FY 2014 FY 2013 FY 2012 

				FY 2014	FY 2013	FY 2012
Investigations Initiated				4297	5314	5125
Prosecution Recommendations				3478	4364	3701
Informations/Indictments				3272	3865	3390
Convictions				3110	3311	2634
Sentenced*				3268	2812	2466
Percent to Prison				79.60%	80.10%	81.50%

Conviction rate is the percentage of convictions compared to the total number of convictions,

acquittals, and dismissals. The conviction rate for FY 2014 is 93.4%, .03% more than the FY

2013 rate (93.1%).

*Sentence includes confinement to federal prison, halfway house, home detention, or some combination thereof.

The IRS is pushing for harsher sentences as it focuses on prosecuting criminal tax cases with more dollars at stake, according to data in the IRS's Criminal Investigation Division annual report.

Do You Have Unreported Foreign Income?

Your Information Is Being Reported To The IRS!

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ((888) 882-9243)

Court Approves FBAR Penalty and Raises Important Administrative and Constitutional Law Issues

According to Procedurally Taxing - There are only a handful of court cases considering the procedures and substance relating to penalties imposed for failing to file a foreign bank account reporting form, the notorious FBAR.

As most observers know, IRS has been active in offshore compliance, and the penalties for failing to file the FBAR can add up. Despite the attention to the issue, the procedures associated with the imposition of civil penalties are not well-established. This is in part due to the penalties’ provenance in the Bank Secrecy Act and Title 31, rather than the Internal Revenue Code and Title 26.

Last week, in response to a summary judgment motion, in Moore v US the district court for the western district of Washington reviewed the procedures and standards that apply to penalties for non-willful failure to file the FBAR.

In the opinion, the district court held that the taxpayer violated the law by not filing FBARs and did not have reasonable cause for the nonfiling but that the record before it was inadequate for it to determine whether the amount of the penalties was appropriate.

The opinion is interesting for many reasons, including its extensive discussion of the Administrative Procedure Act and the constitutional challenges Moore raised in opposition to the IRS’s assessing FBAR penalties. In addition, the opinion discusses the merits of Moore’s reasonable cause defense, a defense with considerable law in the context of civil tax penalties but not much law in the world of FBAR penalties.

Do You Have Undeclared Income from a Foreign Bank?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at 

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ((888) 882-9243)

OVDP Penalty Increased To 50% For 13 Foreign Banks

The new revisions to the US offshore voluntary disclosure initiative, which we posted on 6/18/14 "IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance", now provides for and increased 50% FBAR Penalties for 'Willful' Non-Disclosers.

This group includes those individuals who have offshore bank accounts with a foreign financial institution which has been publicly identified as being under investigation, or is cooperating with a government investigation. IRS has published a list of those foreign financial institutions or facilitators. 

The complete list is as follows:

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. HSBC India
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield).
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates (effective 12/19/14)
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA (effective 12/22/14)
13. BSI SA (effective 3/30/15) . See our post BSI Becomes the First Swiss Bank to Settle With Under the U.S. Swiss Bank OVDP Program.

A list of foreign financial institutions or facilitators meeting this criteria is available.

Of course, the IRS may add names to that list at any time, and whole groups of taxpayers will then be cut-off from OVDP without prior notice.

The same goes for taxpayers who worked with a "facilitator" who helped the taxpayer establish or maintain an offshore arrangement if the facilitator has been publicly identified as being under investigation or as cooperating with a government investigation. 

Taxpayers who had undeclared income from one of these 13 Banks are still be eligible to enter the OVDP, but they will be subject to a 50% offshore penalty, rather than the existing 27.5 percent penalty.

Of course if the IRS already has a particular taxpayer's name, then that person will not be eligible to enter the OVDP, and could be subject to multiple FBAR penalties.

Do You Have Undeclared Income from One
of the 13 Banks under Investigation by the IRS?

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ((888) 882-9243)

BSI Becomes the First Swiss Bank to Settle With Under the U.S. Swiss Bank OVDP Program.

The Department of Justice announced on March 30, 2015, that BSI SA, one of the 10 largest private banks in Switzerland, is the first bank to reach a resolution under the Department of Justice’s Swiss Bank Program.

In a deal with U.S. prosecutors, Swiss private bank BSI SA agreed to pay a $211 million penalty and hand over leads on more than 3,000 accounts with U.S. ties, as well as the actual names of an undisclosed, but presumably much smaller group of U.S. account owners.

We are using the information that we have learned from BSI and other Swiss banks in the program to pursue additional investigations into both banks and individuals.”

Under the program, banks are required to:

• Make a complete disclosure of their cross-border activities;
   
• Provide detailed information on an account-by-account basis for accounts in which U.S. taxpayers have a direct or indirect interest;
   
• Cooperate in treaty requests for account information;
   
• Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
   
• Agree to close accounts of account holders who fail to come into compliance with U.S. reporting obligations; and
   
• Pay appropriate penalties.

The “non-prosecution agreement,” which allows BSI to avoid criminal charges in the U.S., is the first to be sealed under a controversial amnesty program the U.S. Department of Justice announced in August 2013 for all Swiss banks, except the 14 already under criminal investigation.  

At one point, BSI had 3,500 U.S. linked accounts 

holding a total of $2.78 billion in assets.

BSI is part of the approximately 100 banks that signed up for the DoJ program  available to banks not under criminal investigation for helping clients evade US taxes, which saved them from prosecution if they co-operated with authorities amid a broad tax crackdown. Under the program provisions, a bank must pay a penalty equal to 20 per cent of the total value of all non-disclosed US accounts held by the bank on August 1, 2008. The penalty amount gradually increases for secret accounts opened after that date. 

BSI is accused of helping US clients create sham companies to hide the identity of account holders and of issuing credit or debit cards without names visible on the cards to hide client identities, the DoJ said. The bank also helped customers repatriate cash. 

Fourteen other banks not eligible for the programme are facing DoJ criminal cases. They include HSBC, which is under renewed scrutiny after leaked documents related to its alleged efforts to help clients evade taxes were recently published by the media. 

DoJ officials have defended the unprecedented Swiss program, saying the Swiss banks are providing leads that allow U.S. investigators to uncover where secret money has gone and to eventually (after a lot of back and forth with Swiss authorities) uncover the identities of some tax-cheating U.S. account holders.

The fact that most names won’t be revealed at first, gives customers of the bank time to apply to the IRS’ long running “offshore voluntary disclosure program,” it allows individuals with secret offshore accounts to avoid criminal prosecution in return for confessing and paying back taxes and a penalty equal to some percentage of the account’s maximum value, but tax cheats whose names the IRS already has aren’t eligible for that program. 

Last August, the IRS increased the OVDP penalty to 50% of an account’s maximum value in those cases where the money was held at an institution that has been publicly identified as under investigation, as BSI now has.

BSI helped its U.S. clients create sham corporations and trusts that masked the true identity of its U.S. accountholders.  Many of its U.S. clients also opened “numbered” Swiss bank accounts that shielded their identities, even from employees within the Swiss bank.  BSI acknowledged that in order to help keep identities secret, it issued credit or debit cards to many U.S. accountholders without names visible on the card itself. 

From the beginning of the Swiss Bank Program, the department has emphasized the importance of the banks’ helping to identify individuals who facilitate U.S. tax evasion and U.S. accountholders.  BSI provided substantial assistance in this regard. 
 

The department’s offshore enforcement efforts have reached far beyond Switzerland, as evidenced by publicly announced actions involving banking activities in India, Luxembourg, Liechtenstein, Israel and the Caribbean. 

While BSI’s U.S. accountholders who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS’s offshore voluntary disclosure programs, the price of such disclosure has increased. With today’s announcement of BSI’s non-prosecution agreement, its noncompliant U.S. accountholders must now pay that 50 percent penalty to the IRS if they wish to enter the IRS’ program.  

Are You One of The 3,500 US Taxpayers 

With Undeclared Income From a BSI Account?

Do You Have Unreported Foreign Income?

Your Information Is Being Reported To The IRS!

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ((888) 882-9243)

Sources:

DoJ
Forbes

Financial Times

FATCA Guidance Clarifies Form 8966 Filing Requirements

IRS has added new frequently asked questions (FAQs) concerning Foreign Account Tax Compliance Act (FATCA) reporting to its website. Specifically, the new FAQs clarify certain aspects of the requirement and deadline for filing Form 8966 (FATCA Report) for certain filers.

Nil Reporting. New FAQ 1 answers the question: are filers of Form 8966 required to file a nil report (i.e., one that declares that it has no substantial U.S. owners for the calendar year)?

In a previously posted FAQ, IRS had clarified that only "direct reporting" NFFEs are required to submit nil reports. A direct reporting NFFE is an NFFE that has elected to report its direct or indirect substantial U.S. owners to IRS and complies with the requirements under Reg. § 1.1472-1(c)(3), including the requirement to report directly to IRS on Form 8966. For all other entities, IRS does not require the submission of nil reports - that is, such submissions are optional. However, because other jurisdictions may still require such reporting, taxpayers should check with the jurisdiction in question.

New FAQ 1 states that a direct reporting NFFE (and a sponsoring entity of a direct reporting NFFE) is required to submit Form 8966 (a nil report) to declare that it has no direct or indirect substantial U.S. owners for the calendar year.

Reporting Deadline. FAQ 2 addresses the question: when is Form 8966 due for reporting with respect to calendar year 2014 for participating FFIs and reporting Model 2 FFIs?

For participating FFIs, the Form 8966 is due on or before March 31 of the year following the end of the calendar year to which the form relates. In the Form 8966 instructions, for reporting with respect to calendar year 2014 only, an automatic 90-day extension of time to file Form 8966 is permitted, without the need to file any form or take any action. 

On the other hand, the Form 8966 instructions state that the automatic 90-day extension of time to file Form 8966 is not available to reporting Model 2 FFIs reporting on a non-consenting U.S. account.

A filer (other than reporting Model 2 FFIs reporting on a non-consenting U.S. account) with a Mar. 31, 2015 due date, has until June 29, 2015 (the extended 90-day deadline) to submit Forms 8966.

IRS provided that reporting Model 2 FFIs reporting on a non-consenting U.S. account should refer to the applicable Model 2 IGA for the due dates of the Forms 8966. 

IRS recognizes that FFIs will be using the International Data Exchange Services (IDES) system, a secure web application for the U.S. to transmit and exchange FATCA data with foreign jurisdictions, for the first time. See our post IRS Opens Gateway for Exchange of FATCA Data on U.S. Owned Foreign Accounts.

Do You Have Unreported Foreign Income?

Your Information Is Due To Be Reported 

To The IRS By March 31, 2015!

Want to Know if the OVDP Program is Right for You?

Contact the Tax Lawyers at

Marini & Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

Toll Free at 888-8TaxAid ((888) 882-9243)