Part I: U.S. Citizens Residing Outside the U.S. Probably Have Some Solace Re: Acquittals of Swiss and Israel Bankers

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U.S. taxpayers living outside the U.S. are increasingly becoming aware of the long arm of the U.S. tax law.

First, more and more individuals overseas are understanding the unique U.S. citizenship based taxation system. Unique in the world.  See, Will Congress Intervene to make USC based Tax Laws More User Friendly to USCs and LPRs Residing Outside the U.S.?

Second, the Foreign Account Tax Compliance Act (“FATCA”) and its breathtaking reach and scope, is also creating greater awareness of the costs and consequences to U.S. citizens overseas.  See, Part 1- Unintended Consequences of FATCA – for USCs and LPRs Living Outside the U.S.

Third, U.S. federal government has become increasingly more aggressive with U.S. taxpayers and their worldwide assets more generally.  See, FBAR Penalties for USCs and LPRs Residing Overseas – Can the Taxpayer have no knowledge of the law and still be liable for the willfulness penalty? See government memorandum.Global Entry Website - Kiosk

Previous posts here have questioned how aggressive will the IRS and the Justice Department be against U.S. citizens residing oversees.  See,  Will the IRS treat a USC or LPR residing outside the U.S. who purposefully refuses to file U.S. income tax returns and information returns the same as “tax protesters”?

There are limits the government has, both practically and legally, in enforcing U.S. law overseas.  See, U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Legal Limitations

A most significant limitation for the government reared its head twice in the last few hours, after two juries came back with acquittals of two separate bankers who were accused of aiding and abetting U.S. taxpayers.  They were both employed by non-U.S. banks.

The most reverberating acquittal was the former head of wealth management at the large Swiss Bank UBS, Raoul Weil.  He was indicted in 2008 and was a fugitive until his arrest in 2013 in Italy.  The U.S. federal government had alleged he had aided and abetted U.S. taxpayers’ evade the reporting of billions of dollars of U.S. assets.  According the Financial Times, the Florida jury only deliberated a little more than an hour on Monday 3 Nov. 2014, Ex-UBS banker cleared on US tax charges

Also, on Friday a federal jury in California deliberated and acquitted a former retired banker from the Israeli bank Mizrahi on conspiracy and other related tax crime charges.  See Bloomberg,  Ex-Mizrahi Octogenarian Banker Acquitted at Tax Trial.

These are both major setbacks for the government.  The Department of Justice had previously released scathing press releases with the indictments, specifically including the indictment of Mr. Raoul Weil of UBS. These following statements were included:

Professionals, including bankers, who promote fraudulent offshore tax schemes against the United States, will be held accountable,” said John A. Marrella, Deputy Assistant Attorney General of the Justice Department’s Tax Division. “These individuals face severe consequences including imprisonment and substantial fines.”

“The IRS is aggressively pursuing anyone who helps wealthy individuals hide their assets offshore and dodge the tax system,” said IRS Commissioner Doug Shulman. “As the global commerce and capital flows continue to increase, we have stepped up our efforts on international tax evasion.”

In these two cases, the juries obviously did not agree with the government that the bankers were illegally assisting their clients under U.S. law.

Part II of this post will discuss the impact these acquittals will likely have as the government attempts to pursue U.S. citizens on tax charges who live overseas.



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