FATCA Guide for Whistleblowers

FATCA is an area of the law where whistleblowers could emerge as an integral partner with the United States to promote compliance by banks and other financial institutions in the fight to reduce offshore tax evasion.  Because of the incentive programs the U.S. Government has put in place, a whistleblower could also earn massive rewards over the next ten years.  The investigations, prosecutions and settlements with UBS (2009) and Credit Suisse (2014) demonstrate the commitment of the government to promote compliance by large corporations in this area.

By providing information about non-compliant banks and financial institutions to the Internal Revenue Service, the informant (most likely a bank employee) could also receive a sizable payment when the IRS collects money as a result of a tip. The IRS whistleblower program currently pays between 15 and 30 percent of money recovered to tips complying with the rules set forth in IRC section 7623(b).

HISTORY OF FATCA

Estimates are that Americans use offshore tax evasion to avoid paying between $40 and $70 billion in taxes to the U.S. Government every year. After the U.S. prosecuted UBS for aiding Americans hiding income overseas thanks to information provided by tax whistleblower Bradley Birkenfeld, it offered a variety of amnesty programs to encourage Americans to settle their tax bills and declare their offshore assets and income.

Around this time, the bill was first introduced into the House and Senate as the Foreign Account Tax Compliance Act of 2009 by Senator Max Baucus and Representative Charles Rangel. It was ultimately passed by Congress as part of the Hiring Incentives to Restore Employment Act in 2010.

Delays pushed back the law from its initially scheduled July 2013 date for full implementation.  Instead, FATCA went into effect in 2014 with relaxed enforcement for financial institutions making a “good faith” effort to comply with the law.

FATCA COULD LEAD TO MASSIVE PAYOUTS FOR WHISTLEBLOWERS

The tax whistleblower law imposes 30 percent taxes on overseas payments to financial institutions that don’t share information about their clients and client assets with the U.S. Government.  For a bank that isn’t in compliance with FATCA, the potential penalties are staggering.

Because more than 77,000 financial institutions will be tasked with compliance, there are likely to be more than a few which are intentionally violating an aspect of the law at any given point in time.

The whistleblower program offers rewards of between 15 and 30 percent of the amount collected as a result of information provided to government officials through section 7623(b).  It also offers the opportunity to put evidence of non-compliance by a financial institution in front of the appropriate employees of the IRS to launch an investigation and put a stop to their misconduct.

Ready to learn more?  Speak to one of our IRS whistleblower attorneys by calling 1-800-590-4116.

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