IRS Files Criminal Action Against Foreign Bank

Any bank that assists a US individual or entity evade US tax or hide money, regardless of where that bank is located, is guilty of a felony under US law.

It was not until the USA charged Union Bank of Switzerland, (UBS), with criminal activity that banking secrecy began to change. The USA government alleged that between 2000 and 2007, UBS helped its US clients evade taxes by accepting fictitious US tax numbers and sham corporations as beneficiaries of interest bearing accounts.  By failing to report their actual US tax numbers to UBS, UBS was unable to report their income to the IRS as required on Form 1099.

In 2008, the IRS filed a criminal action against UBS and demanded that UBS disclose its records of US persons who maintained unreported accounts in UBS in Switzerland. The case quickly evolved into a dispute between the USA and Swiss governments and was ultimately negotiated out of court.

It resulted, in 2009, in a Deferred Prosecution Agreement, under the terms of which, UBS had to: provide the US government with the names of some of their US clients, stop providing banking services to US clients with undeclared accounts, and pay $780 million in fines and penalties. UBS admitted to helping 52,000 US clients avoid paying taxes.

From a legal perspective, the agreement reached between the US and Swiss governments only minimally affected the Swiss banking secrecy laws. On a practical level, however, it changed the face of the world and it reaches into the pockets of every US citizen working and living abroad.