Offshore Money Schemes
A Californian used an elaborate scheme to hide money he held offshore, by claiming that he had no financial interest in or signature authority over any foreign financial accounts on his U.S. tax returns and FBARs.
The Foreign Bank's Elaborate Back to Back Loans & Concealed Accounts
A foreign bank held mail from delivery to the United States, where he had deposited $2.4 million between 1994 and 2011. The man used an intricate system of back to back loans in conjunction with the bank, designed to allow him, as a borrower, access to his concealed accounts. In other words, the money was withdrawn from a corresponding U.S. branch in the United States, disguised as a loan while being secured by the deposits held in the foreign bank. To hide being found out, additional undisclosed foreign accounts were set up in two additional countries from 1994-2015, a total of 4 banks, having assets of at least $1 million each.
Admitting to The Conspiracy
The original foreign bank entered into a deferred prosecution agreement, admitting to the conspiracy to assist over 2,000 U.S. taxpayers to prepare and present false tax returns by hiding assets and income. The names of these additional 2,000 account holders were turned over to the U.S. Federal government by the bank as part of their agreement. To-date the bank has paid over $240 million in fines to the United States and continues to cooperate in ongoing civil and criminal investigations.
This guilty plea will send the Californian to prison for up to 3 years with years of supervised release, restitution and monetary penalties. The amount of restitution, fines and penalties might far exceed the total amount of money held in undisclosed locations overseas. Sentencing is scheduled in 2019.
Bank Secrecy, Is No Longer
The IRS, through its Criminal Investigation (CI) division has established overseas offices with forensic experts working day and night to find undisclosed assets held by U.S. taxpayers overseas. With over 51 new tax treaties established with foreign governments, intense cooperation has begun to track down anyone who is falsifying individual and business tax returns.
If you are concerned about this trending IRS policy to hunt down and prosecute, you must decide if it’s worth spending time in jail, losing all your money and possibly much or your fortune to pay all the penalties.
If you have questions, you should speak to a licensed U.S. attorney, preferably one specializing in expat tax issues before discussing anything with your financial advisors or CPA. Only a licensed attorney can provide client privilege protection.
The IRS is set on bringing tax cheats to justice. If you are not sure how you could be affected, reach out to Jason Kovan, our Managing Tax Partner. Prior to founding TaxLawNow and Expat Tax Partners LLC, Jason was an Executive Tax Director with KPMG serving individuals and corporate clients throughout the world.
Jason is a member of the Florida Bar, South Carolina Board of Accountancy, and is also a Florida licensed private investigator. Jason is a Phi Beta Kappa graduate from Purdue University, and holds a JD and MBA from Washington University in St. Louis. Jason also holds a Masters in Tax (MST) from Golden Gate University.
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