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Government gets first conviction using FATCA

On Behalf of | Sep 17, 2018 | Tax Law

The Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to indentify U.S. taxpayers and report information about their financial accounts. The primary aim was to prevent taxpayers from using foreign accounts to commit federal tax crimes.

The law was enacted in 2010, yet it has just now seen its first conviction. According to an announcement by the Department of Justice, former Chief Business Officer and former Chief Executive Officer of Loyal Bank Ltd pleaded guilty to conspiring to defraud the United States by failing to comply with FATCA. The offshore bank has offices in Hungary and Saint Vincent and the Grenadines.

The government catches its man

In something straight out of a thriller, an undercover government agent met with the bank executive in June of 2017 and explained that he was a U.S. citizen interested in stock manipulation schemes. He wanted to open several accounts to facilitate this, but did not want his name attached to the accounts. The banker said it could be done and provide debit cards for access.

The agent met again with the banker in July of 2017 and explained how his scheme would work, including how it would avoid FATCA. The banker said he would not submit FATCA paperwork unless it indicated obvious United States involvement. Loyal Bank subsequently opened several accounts and at no time requested FATCA information.

Extradited and convicted The banker was extradited from Hungary to the United States in July 2018 thanks to an international effort involving several government and law enforcement agencies here in the U.S. and abroad. The banker entered his plea in September and he now faces up to five years in prison.

There may be the temptation to cut corners or omit information when filing taxes, but it is foolish to think that an individual can get away with it. If they are unhappy with their current tax obligations, it would be wise for them to speak with an attorney that has experience in tax law, particularly if the business has dealings outside the country that would require FATCA paperwork. Attorneys can often find legal cost cutting measures that make smart business sense without putting businesses in jeopardy.