U.S. Non-Prosecution Program for Swiss Banks Puts Non-Compliant FBAR Taxpayers at Risk

On August 29, 2013, the U.S. Department of Justice announced a new Department of Justice program, the “Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks.”  According to a joint statement issued by the Department of Justice and the Swiss Federal Department of Finance, the Program provides “a path for Swiss Banks that are not currently the target of a criminal investigation to obtain resolution concerning their status in connection with the Department’s overall investigations, and to assist the Department of Justice in its law enforcement efforts.”

In exchange for offering information about their U.S. account holders and paying a penalty, Swiss banks who may have committed U.S. tax or Foreign Bank Account Report (“FBAR”) crimes will be eligible to enter into a non-prosecution agreement with the United States government.  The penalty paid by a Swiss bank is dependent on the aggregate balance of its non-compliant U.S. account holders’ accounts.  The penalty base is reduced for U.S. compliant accounts and those accounts disclosed by account holders through the IRS’s Offshore Voluntary Disclosure Program.  This includes voluntary disclosures made by U.S. account holders following notification by a Swiss bank that the bank was participating in the Non-Prosecution Program.  Because a Swiss bank’s penalty will be reduced if its U.S. account holders participate in the IRS’s Offshore Voluntary Disclosure Program, Swiss banks have been sending notices to their U.S. customers of their intent to participate in the Non-Prosecution Program.  U.S. account holders receiving these notices should seek the assistance of a U.S. tax attorney with Foreign Bank Account Report (“FBAR”) experience.

Stephen J. Pieklik of the Pittsburgh tax law firm Williams Coulson has successfully advised many clients with respect to foreign financial account matters, including the 2009 Offshore Voluntary Disclosure Program, the 2011 Offshore Voluntary Disclosure Initiative, the 2012 Offshore Voluntary Disclosure Program, and this new program.