The Justice Department’s pursuit of offshore banks for assisting U.S. customers avoid taxes is expected to reach a conclusion with regard to another large settlement against a Swiss bank in the first quarter of 2016. Julius Baer Group AG has announced it reached an agreement in principle with the U.S. Attorney’s Office for the Southern District of New York to resolve their investigation and it reserved $547 million to settle the matter.
In the coverage of this story, the Wall Street Journal reported that there are still about a dozen Swiss banks under investigation by the Department of Justice. Previous investigations have led to large settlements, including $780 million by UBS, $2.6 billion by Credit Suisse and $400 million (between the US and NY) by Bank Leumi. The self-reporting program for Swiss banks offered by the Justice Department has also led to 73 banks agreeing to pay more than $1 billion in penalties for undeclared U.S. accounts.
Offshore tax evasion been a big area for IRS whistleblowers so far and that is unlikely to change anytime soon. The IRS paid out its largest whistleblower reward, $104 million dollars, in the case against UBS. We expect FATCA whistleblowing to grow over the next ten years as the law is implemented and some banks start violating its provisions. FATCA provides for bank reporting to the IRS. If the bank does not comply with the terms of FATCA, the law imposes a tax on the financial institution in the amount that it should have withheld from the individual or corporation. If a bank is non-compliant, it could rack up significant taxes owed to the U.S. Government. Reporting their wrongdoing could then lead to significant rewards for a tax whistleblower under the IRS’ section 7623(b) program.