In February 2009, UBS AG, Switzerland’s largest bank, entered into a deferred prosecution agreement with the U.S.:
1. Admitting guilt on charges of conspiring to defraud the U.S. by impeding IRS tax collection.
2. Paid $780 million in fines.
3. Agreed to provide the identities and account information of U.S. Taxpayers with “cross-border” UBS accounts.
To date, UBS has supplied the IRS with the names of 323 Americans who wired money from their U.S. accounts to Switzerland. By August 2010, UBS has agreed to disclose an additional 4,450 U.S. Taxpayers with cross-border UBS accounts.
The Swiss Government has issued an edict mandating that UBS cease and desist “turning over” the identities of U.S. Taxpayers to the IRS. UBS has proposed a course of conduct which insulates itself from conflicts with the Swiss legislature and the U.S. authorities.
UBS has proposed to send to each U.S. Taxpayer a USB stick (i.e., a flash drive) with their “cross-border” UBS bank account records. Once the USB stick is sent to the U.S. Taxpayer, the IRS may commence a civil tax audit, subpoena the USB sticks and obtain all tax information sought from UBS.
U.S. Taxpayers with unreported foreign bank accounts (and income) are subject to IRS civil tax audits with civil penalties (monetary penalty, only) and criminal tax prosecutions (monetary penalty and jail).
The IRS, under a civil tax audit:
1. May summon evidence which support culpability for a crime (e.g., tax evasion) and civil penalties (e.g., 75% fraud penalty).
2. May trigger investigation into money laundering (i.e., when U.S. Taxpayers attempt to repatriate into the U.S., funds from undisclosed foreign bank accounts, they may be culpable for money laundering).
3. Use evidence obtained under a civil tax audit to support a subsequent criminal prosecution (including culpability for 3rd party co-conspirators for obstructing tax collection and conspiracy).