FATCA Fraud Leads to Criminal Conviction for Overseas Bank Executive (Board-Certified Tax Law Specialist)
FATCA Fraud Leads to Criminal Conviction for Overseas Bank Executive
When it comes to Offshore and Foreign Account Penalties, FATCA (Foreign Account Tax Compliance Act) is not typically the basis for a criminal conviction.
Usually, a person knowingly/willfully fails to file an FBAR, Form 5471, Form 3520-A, etc., and that is the catalyst which sparks a criminal investigation by the IRS Special Agents and possible referral to the DOJ.
FATCA is raising the stakes and moving from civil violations to criminal enforcement.
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FATCA Criminal Conviction
Recently, on September 11, 2018 the former Chief Business Officer and former Chief Executive Officer of Loyal Bank Ltd, pleaded guilty under FATCA for committing FATCA Fraud.
Specifically, the CEO of the offshore bank (with offices in Hungary and Saint Vincent & Grenadines) pleaded guilty to conspiring to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (FATCA).
Baron was extradited to the United States from Hungary in July 2018.
Sidenote: OVDP is Ending, But NOT Voluntary Disclosure
As we have written about on our blog over the last year, this was clearly the endgame strategy for the IRS. Their goal was to only facilitate OVDP (which is a great option for people who find themselves in predicaments such as Mr. Baron) for as long as they need it, and not any longer.
With that said, there is still a traditional IRS Voluntary Disclosure Program that has been on the books for many years, and not currently set to expire.
The traditional (non-OVDP) IRS Voluntary Disclosure Program is not limited to just offshore/foreign income or assets, and requires the experience of a highly-specialized International Tax Lawyer.
So remember, even when OVDP ends on 9/28/2018 — you still have options.
3 Important Facts about the First FATCA Criminal Conviction
The CEO was Extradited to the U.S. from Hungary
Mr. Baron, the Former CEO was a Naturalized St. Vincent Citizen and Resident of Budapest, Hungary.
This is important, because the CEO was extradited to the United States. In other words, he was unable to fight extradition from Hungary and avoid having to come to the United States to face the music.
Many people falsely believe they can hide out in a foreign country to avoid extradition (The common myth of moving to Brazil to father a child with a Brazilian National), but oftentimes they cannot, and find themselves in a U.S Criminal Court of Law.
Here, the CEO was brought to the U.S. since the U.S and Hungary have a bilateral extradition agreement.
Saint Vincent & Grenadines and Hungary Both Have FATCA Agreements
If you refer to the recent list of FATCA signees, you will find that Hungary has a “Signed Agreement” and Saint Vincent & Grenadines has a FATCA Agreement “In Force”.
Moreover, Loyal Bank agreed to Report under FATCA (GIIN: 9V4NLM.00000.LE.670)
Therefore, it is not safe to presume that only major foreign countries such as the U.K. or Australia are complying with FATCA.
The FATCA Conviction is Criminal
While under most circumstances, the penalties for a FATCA violation are civil, the U.S. Government is doubling down on FATCA, and now using it as a means of criminal enforcement. This is the first time that a defendant was criminally convicted under FATCA.
The Basic Facts of the Case
According to court documents, in June 2017, an undercover agent met with Baron and explained that he was a U.S. citizen involved in stock manipulation schemes and was interested in opening multiple corporate bank accounts at Loyal Bank.
“The undercover agent informed Baron that he did not want to appear on any of the account opening documents for his bank accounts at Loyal Bank, even though he would be the true owner of the accounts. Baron responded that Loyal Bank could open such accounts and provide debit cards linked to them.
In July 2017, the undercover agent again met with Baron and described how his stock manipulation scheme operated, including the need to circumvent the IRS’s reporting requirements under FATCA.
During the meeting, Baron stated that Loyal Bank would not submit a FATCA declaration to regulators unless the paperwork indicated “obvious” U.S. involvement. Subsequently, in July and August 2017, Loyal Bank opened multiple bank accounts for the undercover agent. At no time did Baron or Loyal Bank request or collect FATCA Information from the undercover agent.
Baron’s guilty plea represents the first-ever conviction for failing to comply with FATCA. When sentenced, Baron faces a maximum of five years in prison.
Baron is the second defendant to plead guilty in this case. On July 26, 2018, Arvinsingh Canaye, formerly the General Manager of Beaufort Management Services Ltd. in Mauritius, pleaded guilty to conspiracy to commit money laundering.
Use IRS Voluntary Disclosure to Avoid Criminal Convictions
As long as the money is from legal sources and you have not been reported under FATCA (or contacted by the IRS) you may be able to avoid a criminal investigation or conviction with IRS Voluntary Disclosure.
Golding & Golding, A PLC
We have successfully represented clients in more than 1000 streamlined and voluntary disclosure submissions nationwide, and in over 70-different countries.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.