FBAR Penalty Under Offshore Voluntary Disclosure Program Set to Double on August 4, 2014 for Foreign Bank Accounts with Blacklisted Banks

Do you currently have, or previously had, a bank account with one of the following foreign banks?

  1. Wegelin & Co.
  2. Zurcker Kantonalbank
  3. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
  4. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
  5. UBS AG
  6. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
  7. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
  8. Liechtensteinische Landesbank AG
  9. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
  10. swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG

If so, you should seriously consider immediately submitting an application to join the 2014 Offshore Voluntary Disclosure Program (OVDP), an amnesty program offered by the IRS for those who have failed to disclose, and pay income tax on, their foreign bank accounts. Immediate action is required because the current 27.5% one-time FBAR penalty under this amnesty program is set to increase to 50% on August 4, 2014 for all applicants who have or had accounts with any of the above listed banks.

Since the IRS has previously disclosed that these ten foreign banks are currently under criminal investigation, it was widely believed that one holding an account with one of these blacklisted institutions would not be allowed to enter the OVDP due to the fact that the IRS was already aware of their undisclosed foreign bank account. However, under recent modifications to the OVDP it is now clear that account holders from these blacklisted banks can, indeed, join the OVDP and avoid criminal prosecution but the applicable penalty will practically double if the application is not filed prior to the August 4, 2014 deadline.

Since these blacklisted banks are currently under criminal investigation for aiding Americans in hiding their offshore financial accounts, you can assume they are cooperating with U.S authorities so as to mitigate their exposure to civil and criminal sanctions. You can also assume that any account you have or had with one of these banks will be disclosed to U.S. authorities as part of this criminal investigation. Therefore, you should probably enter the OVDP and do so immediately so as to avoid criminal prosecution, qualify for the lower penalty, and avoid the draconian 50% penalty which will go into effect on August 4, 2014.


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