Hiding UBS Investors in Trouble No Matter What Swiss Parliament Decides

WALLINGFORD, CT — Americans who still hold undeclared accounts at the Swiss banking giant UBS may think they got a break this week, but they are wrong, according to tax resolution attorney Anthony Parent.   As of this writing, the houses of the Swiss parliament are undecided about allowing UBS to share information with the IRS, but Parent says the outcome won’t have much effect on the thousands of suspected American tax dodgers who have yet to declare the value of their account to the IRS.  Chances are UBS will disclose that information on its own, no matter what the vote.  Additionally the IRS has other ways of following the trail of evasion.  He explains what that could mean to those Americans who have still not come clean about their UBS Swiss accounts:

How is it that Switzerland can continue to refuse to release the UBS account holders’ names?

Switzerland has built its financial markets on its ability to keep the identity of investors confidential.  It is against the Swiss spirit to give up that information.  Under the 1996 Convention Act, Switzerland has authority to share whatever it wants. Those names are requested with the Swiss Federation Tax Authority (SFTA).  UBS can make the request to them but the SFTA can shoot them down.

But, really, the vote will have very little impact on those people still holding UBS accounts because UBS may release their names on its own even if it means breaking Swiss law.

What happens if the IRS doesn’t get those names?

The IRS won’t take that laying down.  So anyone counting on this as a way around coming clean about their account is making a mistake.  IRS insiders tell me they’ll find other ways to find those account holders and that could get really ugly.

The IRS signed a deferred prosecution agreement with UBS that said they wouldn’t prosecute their executives if they got the names of account holders.  What happens if Switzerland refuses to turn over the names?

The IRS doesn’t really want to shut UBS down. And they don’t want to have to send anyone to prison. They want the money and they want the names of those involved in tax evasion. So it is likely that they will enter into a new, possibly, secret agreement in which UBS can directly send those names directly to the IRS. Again, even though this is in violation of the Swiss Federation laws.

What happens to the UBS employees who break Swiss secrecy laws and share information with the IRS?

There is a really good possibility that those who breach Switzerland’s secrecy law could be arrested and tried absentia.  This is not the end of the world. This is not an extraditable offense.  For an offense to be extraditable, the crime has to be a felony in both Switzerland and in the United Sates. But sharing information with a taxing authority is not a criminal offense in the US; actually it is a mandate.

What will be the impact of this off-shore crackdown?

There was an r special UBS voluntary disclosure program that limited penalties, but that deadline has passed. That doesn’t mean people with these accounts should continue to withhold information about them from the IRS.  If the IRS has not yet begun a criminal investigation the standard voluntary disclosure program may still be available to them. The cost to come clean will be less when compared to incapacitating civil and criminal penalties those who continue to withhold that information will no doubt risk.  I would urge anyone who still has these accounts to work with a professional and come clean with the IRS.  Doing nothing is not worth the risk.

About IRS Medic

IRS Medic at Parent & Parent is a practice of tax attorneys that works to resolve tough tax problems for businesses and individuals.  These issues can range from unfiled taxes to audits, liens, penalties, other federal and state agency tax actions and business recovery. Attorney Anthony Parent founded the firm in 2003 to help clients deal with difficult tax problems.  He combined an academic background in finance with a law degree to develop the foundations of the practice.

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