Caitlin Urbach
Privacy of Financial Data News: International Accounts, Voluntary Disclosure, and Privacy
The IRS announced on January 9, 2012 that it was instituting another voluntary disclosure program for those with foreign bank accounts.
Taxpayers with foreign bank accounts with more than $10,000 in them are required to note the account on their income tax return and on a form entitled “Report of Foreign Bank and Financial Accounts” (FBAR), and those who fail to report these accounts are subject to significant financial penalties as well as possible criminal punishment. According to a recent Forbes article, the voluntary disclosure program that the IRS has created provides for reduced penalties in order to incentivize disclosure, and is also accompanied by the implied threat that the government will pursue offenders more diligently once the disclosure period ends. While this program provides a significant opportunity for those who have evaded detection in the past and would like to take advantage of the relative leniency of the program’s penalties, the very requirement of disclosure highlights how little financial privacy is permitted between U.S. taxpayers and the government. Even with required disclosure to the government, however, foreign bank accounts may provide some additional privacy relative to domestic accounts and so continue to have their advocates in the United States. A Business Insider contributor recently commented that the United States government monitors domestic accounts in a way that is not possible
overseas– the Financial Crimes Enforcement Network, which is part of the U.S. Treasury, requires banks to fill out reports whenever a customer’s financial activity is deemed suspicious. While an international bank account might not be the panacea that those seeking financial privacy from the U.S. government have hoped for, some may continue to use foreign bank accounts for the increased privacy that they may offer. The IRS voluntary disclosure program provides a limited opportunity for those who want to benefit from the increased privacy abroad due to the lack of monitoring, while minimizing the legal consequences such individuals would face if they were found not to have disclosed offshore account information.
Links to articles:
IRS FBAR voluntary disclosure initiative:
http://www.forbes.com/sites/irswatch/2012/01/10/deja-vu-yet-another-irs-fbar-voluntary-disclosure-initiative-2/
Commentary on suspicious activity reports and U.S. banks:
http://www.businessinsider.com/why-308127404-americans-are-going-to-get-hosed-2012-1