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Undisclosed Foreign Bank Accounts

By Peter D. Hardy

On July 17, 2008, UBS A.G., the giant Swiss bank, announced its cooperation with the Department of Justice (DOJ) and the IRS and its identification to the authorities of U.S. clients who use undeclared foreign accounts and thus may have committed tax fraud by concealing income. This came on the heels of the guilty plea to conspiracy to commit tax fraud by a former UBS employee who alleges that it was the bank's practice to help U.S. clients conceal foreign assets through the use of nominee entities. The former employee has agreed to cooperate with the government as part of his plea, and a DOJ lawyer informed the court accepting the guilty plea that the cooperation was expected to help the government “nationwide.”

A Senate report alleges that UBS has maintained about 19,000 undeclared accounts for its U.S. clients, and that these undeclared accounts contain up to $18 billion in total assets. The report also attacks LGT Group, a Liechtenstein bank. IRS Commissioner Douglas Shulman has declared publicly that overseas income represents a national tax enforcement priority. Thus, tax enforcement authorities appear poised to root out details of offshore accounts held by many individuals in a rapidly expanding and aggressive investigation.

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