Former UBS banker indicted in tax evasion conspiracy case

A former UBS banker was indicted today on a charge that he helped U.S. clients evade taxes through accounts at UBS and a regional Swiss bank.

The indictment says the banker, Martin Lack, discouraged at least nine U.S. customer from joining an Internal Revenue Service amnesty program offered to those who were hiding assets overseas. He also offered to provide his customers with falsified bank documents to conceal the source of the funds in their undeclared bank accounts, according to the indictment.

Lack, a Swiss resident, is accused of conspiring with another UBS banker to encourage U.S. clients to move their undeclared UBS accounts to the smaller regional bank, which news reports identify as Basler Kantonalbank. The other UBS banker, Renzo Gadola, pleaded guilty last year to similar charges in federal court in Miami.

Switzerland’s Credit Suisse bank targeted for criminal investigation by DOJ

Switzerland’s second largest bank, Credit Suisse Group AG, announced last week that it is the target of a criminal investigation by the Department of Justice, pertaining to former cross-border banking services provided to US clients.

According to Justice Department guidelines, there must be “significant evidence” of illegal activity for the DOJ to target an entity for investigation. In February, four Credit Suisse employees were indicted for allegedly helping US clients evade taxes through secret bank accounts.

Following the agreement reached in 2008 with UBS, Switzerland’s largest bank, some experts have speculated that this investigation could follow a similar trajectory. As a result of that action, UBS signed a differed prosecution deal which required the bank to pay $780 million and turn over data on 250 US clients – it has since provided data on an additional 4,450 accounts.

Credit Suisse is also under investigation in Germany for allegedly helping German clients evade taxes.

New rules for Swiss banks mark shift away from undeclared assets

Switzerland is expected to make changes to its banking laws that will make it more difficult for European neighbors to hide their assets from tax collectors. The proposed agreement with Germany and Britain, expected to be reached by the summer of this year, is intended to preserve banking secrecy, but marks a shift away from undeclared assets. France and Italy are expected to reach similar deals with Switzerland thereafter.

Switzerland is seeking to avoid recurrences of some of the more contentious responses to the problem of banking secrecy for foreign tax collectors, such as the lawsuit between the IRS and UBS that resulted in a payment of $780 million, Swiss bankers being arrested abroad, and the theft and sale of Swizz bank client lists to foreign governments that wish to collect taxes legally owed to them.

The shift in Switzerland’s banking will likely result in the downsizing or consolidation of some firms that rely solely on undeclared assets. Although client confidentiality will be retained under the proposed agreement, Swiss banks will likely be forced to compete in a more transparent environment, the results of which are only beginning to unfold.

IRS to focus on tax evasion schemes in India

The IRS is now considering India among the countries believed to be facilitating major off-shore tax evasion for wealthy Americans, as indicated by the Justice Department’s efforts to acquire the names Indian-American HSBC clients suspected of evading taxes through offshore banking in India.

The request for permission from a federal Judge by the Justice Department to demand those names comes on the heels of a protracted legal engagement with UBS in Switzerland. That action began in 2008 and ended last August with the agreement by UBS to provide information on 4,500 American clients. The IRS is now expanding its anti-fraud efforts to India, a region not previously considered a hotbed for offshore evasion.

According to the New York Times, sources close to the matter indicate that HSBC’s N.R.I. program (Non-Resident Indian), which sought out Indian-Americans for banking in India, may be related to the current legal effort. HSBC has indicated that it does not condone tax evasion, and will cooperate with US requests “while complying with the law in all jurisdictions in which it operates, including India.”

IRS releases “Dirty Dozen” list of worst tax scams for 2011

The IRS has produced a “Dirty Dozen” list of 12 fraudulent and illegal tax schemes, representing “the worst of the worst” in tax scams, according to IRS Commissioner Doug Schulman.

Among the scams included in the list are: hiding income offshore, identity theft and phishing, return preparer fraud, filing false of misleading forms, frivolous arguments, nontaxable social security benefits with exaggerated withholding credit, abuse of charitable organizations and deductions, and abusive retirement plans.

The IRS warns that while such activities may appear to present opportunities to retain wealth illegally by defrauding the government, these scams frequently result in heavy fines, full repayment of taxes (plus interest), and often jail time.

Former UBS client pleads guilty to offshore tax evasion

Richard Werdiger, a former client of Zurich-based UBS AG, has pleaded guilty to concealing assets from the IRS in offshore bank accounts.

The 63-year-old is one of 7 former UBS clients believed to have concealed over $100 million from the IRS. Werdiger was accused of hiding $7 million in 3 accounts in Panama and Lichtenstein.

The former UBS client has agreed to pay $3.5 million in civil penalties and faces up to 20 years in prison when he is sentenced on June 14. The accusations form part of a larger IRS crackdown on offshore tax evasion, which has previously made UBS a focus of interest.

IRS offers information on offshore tax amnesty program in eight new languages

The IRS has released information on its 2011 Offshore Voluntary Disclosure Initiative in several languages, following requests from taxpayers and tax professionals to make the program more accessible to persons who primarily speak non-English languages.

Information on the new amnesty program is now available in Chinese (traditional and simplified), Farsi, German, Hindi, Korean, Russian, Spanish, and Vietnamese. The program creates an incentive for persons owing taxes to the IRS on hidden offshore accounts to come forward and pay their fines, by offering amnesty from some of the harsher penalties that could be applied.

A similar version of this program was offered last year and resulted in thousands of self-disclosures. This current program is less forgiving of tax cheats than the first iteration, but still offers ample motivation for persons guilty of offshore tax fraud to pay their fines and forgo potentially harsher punishment.