Many clients come to us after receiving incompetent, outdated legal advice concerning their current or former offshore accounts, and having paid a lot of money for it. If this post can save one person from such an experience it will have been worth it.
A certain national publication publishes articles regularly on the subject offshore accounts. The articles tend to be a day late and a dollar short. The articles also tend to quote lawyers–generally the same group of lawyers. A recent article included a quote from a lawyer at Caplin & Drysdale purporting to advise account holders. Caplin & Drysdale is on the other side of one of our cases, representing the Swiss bank. One of the most fundamental ethical precepts of the legal profession is that a lawyer shall not have a conflict of interest.
The Problem
It was common for U.S. persons to have foreign bank and brokerage accounts, especially in Switzerland. Some of the accounts were modest in amount, $100,000-$200,000, established to support travel for business or pleasure. Other accounts were in the millions of dollars, established to evade U.S. income tax.
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Swiss banks availed of strict Swiss bank secrecy laws to sell such account relationships. Swiss banks commonly issued no account statements for the accounts. Some Swiss banks sent representatives into the United States to solicit deposit/brokerage relationships. Some Swiss banks serviced such accounts through branch offices in the U.S. under common ownership. And the Swiss banks never issued Forms 1099 to the Internal Revenue Service or to the depositors, facilitating the evasion of U.S. income tax.
Under the Agreement between the United States of America and Switzerland for Cooperation to Facilitate the Implementation of FATCA, dated February 14, 2013 (the "Agreement"), Swiss banks must make aggregate disclosures concerning accounts which were in existence on December 31, 2013, and are owned by which a U.S. person who refuses to consent to disclose the account to the U.S. government. An aggregate disclosure is limited to the total number on recalcitrant U.S. account owners, and total balance of their accounts. There is a mechanism under the Agreement for the U.S. government to procure the identity and account balance of recalcitrant U.S. account holders included in aggregate disclosures.
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