Friday, November 27, 2015

Remarks of Asst Attorney General on Foreign Corrupt Practices Act

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at American Conference Institute's 32nd Annual International Conference on Foreign Corrupt Practices Act excerpted below...

In 1977, when Congress enacted the FCPA, it called the “payment of bribes to influence the acts or decisions of foreign Justice logoofficials…unethical [and] counter to the moral experience and values of the American public.”  In the investigations leading to the act’s passage, Congress uncovered more than $300 million—or nearly $1.2 billion in 2015 dollars—in bribes paid by American companies to foreign officials.

Unfortunately, in the intervening 38 years, corruption has not disappeared.  In fact, as globalization increases, there is some evidence that corruption has as well.  The FCPA has, however, helped bring to justice some of the largest-scale perpetrators of economic corruption, and in 2014, companies paid more than $1.5 billion in corporate FCPA penalties to DOJ alone.  And that does not include payments made to other U.S. and foreign entities.  Clearly, our work to uphold the “moral experience and values of the American public” remains unfinished.

As you may know, that work is led by a team of federal prosecutors in the Criminal Division’s Fraud Section.  They are joined in this fight against international corruption by their colleagues in the Asset Forfeiture and Money Laundering Section—known as AFMLS—which pursues prosecutions against institutions and individuals engaged in money laundering, Bank Secrecy Act violations and sanctions violations.

AFMLS attorneys also seek the forfeiture of proceeds of high-level foreign corruption through the relatively new Kleptocracy Asset Recovery Initiative.  The two units complement each other in their efforts to hold both bribe payers and bribe takers accountable for their criminal conduct.    

I would like to talk with you today about our ongoing efforts to enhance the Criminal Division’s ability to root out and prosecute corruption, and also to provide increased transparency about the division’s decision-making.

During this past year, we increased our FCPA resources, including by adding three new fully-operational squads to the FBI’s International Corruption Unit that are focusing on FCPA and Kleptocracy matters.  We are also preparing to add 10 new prosecutors to the Fraud Section’s FCPA Unit, increasing its size by 50 percent.  These new squads and prosecutors will make a substantial difference to our ability to bring high-impact cases and greatly enhance the department’s ability to root out significant economic corruption.

In addition to increased resources directed to FCPA cases, one of my priorities in the Criminal Division has been to increase transparency regarding charging decisions in corporate prosecutions.     

Greater transparency benefits everyone.  The Criminal Division stands to benefit from being more transparent because it will lead to more illegal activity being uncovered and prosecuted.  This is in part because if companies know the consideration they are likely to receive from self-reporting or cooperating in the government’s investigation, we believe they will be more likely to come in early, disclose wrongdoing and cooperate. 

On the flip side, companies can also better evaluate the consequences they might face if they do not merit that consideration.  In both ways, transparency helps achieve the deterrent purpose of the FCPA because comparatively opaque or unreasoned enforcement action can make it more difficult for companies to make their own rational decisions about how to react when they learn of a bribe. 

Transparency also helps to reduce any perceived disparity, in that companies can compare themselves to other similarly-situated companies engaged in similar misconduct.  There are often limits to how much we can disclose about our investigations and prosecutions—particularly for investigations in which no charges are brought—but we are trying to be more clear about our expectations in corporate investigations and the bases for our corporate pleas and resolutions.

Let me provide some examples to illustrate this point. 

Just a few months ago, the former co-CEO of PetroTiger pleaded guilty to conspiring to violate the FCPA.  He joined his fellow co-CEO and the company’s former general counsel in being convicted of bribery and fraud charges after a DOJ investigation that revealed a scheme to secure a $39 million oil-services contract for PetroTiger through bribery of Colombian officials.  This was serious misconduct that went to the very top of the company, and in a typical case, criminal charges for the company may well also have been appropriate.

We learned about this misconduct through voluntary disclosure by PetroTiger, however.  And after that self-disclosure, the company fully cooperated with the department’s investigation of the misconduct and of the individuals responsible for it.  As you likely know, the department ultimately declined to prosecute the company, or to seek any NPA (non-prosecution agreement) or DPA (deferred prosecution agreement) with it, even though we clearly could have done so.

By contrast, in December of last year—about a month after I last addressed this conference—Alstom S.A., the French power company, pleaded guilty to violating the FCPA.  In fact, Alstom was sentenced just last week.  Alstom admitted to its criminal conduct and agreed to pay a penalty of more than $772 million, the largest foreign bribery resolution with the Justice Department ever.  In addition, Alstom’s Swiss subsidiary pleaded guilty to conspiracy to violate the anti-bribery provisions of the FCPA.  Two U.S.-based subsidiaries also admitted to conspiring to violate the FCPA and entered into deferred prosecution agreements.  The investigation resulted in criminal charges against five individuals, including four corporate executives, in connection with the bribery scheme.  To date, four of those individuals have pleaded guilty. 

Given the significant scope of the misconduct in that case—including the involvement of corporate executives—it is fair to say that the factors we look at in these cases weighed in favor of some kind of criminal disposition.  And it would also be fair to point out that what was missing in those factors was any strong argument, of the type that PetroTiger was able to make, for prosecutorial consideration for Alstom’s own efforts to mitigate the misconduct.  Rather, unlike PetroTiger, Alstom did not voluntarily disclose the misconduct and refused to cooperate with our investigation until years later, after we had already charged company executives. 

When we talk about this kind of credit for mitigation in FCPA corruption cases, we cannot talk simply about “cooperation.”  Cooperation is only one element of mitigation.  In our view, a company that wishes to be eligible for the maximum mitigation credit in an FCPA case must do three things: (1) voluntarily self-disclose, (2) fully cooperate and (3) timely and appropriately remediate. 

When a company voluntarily self-discloses, fully cooperates and remediates, it is eligible for a full range of consideration with respect to both charging and penalty determinations. 

Of course, in some cases the scope or seriousness of the criminal activity or the company’s history will mandate a criminal resolution, but in those cases it will be even more important for the company to present the strongest possible mitigation.  And companies that fail to self-disclose but nonetheless cooperate and remediate will receive some credit.  But that credit for cooperation and remediation will be measurably less than it would have been had the company also self-reported.

Let me walk through now in more detail the elements of those three factors.     

First, as I have said before, companies for the most part have no obligation to self-disclose criminal wrongdoing to the Justice Department.  That has not changed.  And we are not reliant on corporate self-reporting in the FCPA or any other context—indeed, the majority of our FCPA cases are investigated and prosecuted without a voluntary disclosure and sometimes, as in the Alstom case, without corporate cooperation.

As time passes and the world continues to shrink, we have more and more sources of information about FCPA violations, ranging from whistleblowers, to foreign law enforcement, to competitors, to current and former employees, the foreign media, and others.   So if you discover an FCPA violation that you opt not to self-report, you are taking a very real risk that we will one day find out, or that we already know, and you will not be eligible for the full range of potential mitigation credit.  

That said, we recognize that companies often are reluctant to self-report FCPA violations, especially when they believe that we may not otherwise learn of the misconduct.  And we also recognize that FCPA investigations present challenges for us that make them different in some important ways from other types of white collar crime.  

By their nature, overseas bribery schemes can be especially difficult to detect, investigate and prosecute.  Individuals who violate the FCPA and relevant evidence often are located overseas—sometimes in jurisdictions with which we have limited relationships.  FCPA violations often involve one or more third parties, such as resellers or agents, also located overseas.  Money often moves through multiple offshore accounts, usually in the names of shell corporations.  The transactions almost always are concealed in some fashion from the company’s books and records.  And the company often is much better-positioned than the Justice Department to get to the bottom of things in an efficient and timely fashion.

For these reasons, voluntary self-disclosure in the FCPA context does have particular value to the department.   Because of that, we want to encourage self-disclosure by making clear that, when combined with cooperation and remediation, voluntary disclosure does provide a tangible benefit.

What do I mean by voluntary self-disclosure?  I mean that within a reasonably prompt time after becoming aware of an FCPA violation, the company discloses the relevant facts known to it, including all relevant facts about the individuals involved in the conduct. 

To qualify, this disclosure must occur before an investigation—including a regulatory investigation by an agency such as the SEC—is underway or imminent.  And disclosures that the company is already required to make by law, agreement or contract do not qualify. 

Second, in line with the focus on individual accountability for corporate criminal conduct announced earlier this year by Deputy Attorney General Sally Yates, companies seeking credit must affirmatively work to identify and discover relevant information about the individuals involved through independent, thorough investigations. 

Companies cannot just disclose facts relating to general corporate misconduct and withhold facts about the individuals involved.  And internal investigations cannot end with a conclusion of corporate liability, while stopping short of identifying those who committed the underlying conduct. 

In addition to identifying the individuals involved, full cooperation includes providing timely updates on the status of the internal investigation, making officers and employees available for interviews—to the extent that is within the company’s control—and proactive document production, especially for evidence located in foreign countries. 

Some have expressed concern that we now expect companies to conduct more extensive—and expensive—investigations to obtain credit for cooperating.  That is not the case.  As I have said before, we are not asking companies to boil the ocean. 

As always, we continue to expect investigations to be thorough and tailored to scope of the wrongdoing, and to identify the wrongdoing and the wrongdoers.  We expect cooperating companies to make their best effort to uncover the facts with the goal of identifying the individuals involved.  To the extent companies and their counsel are unclear about what this means, we remain willing to maintain an open dialogue about our interests and our concerns, which should help save companies from aimless and expensive investigations. 

A company that does not have access to all the facts, despite its best efforts to do a thorough and timely investigation, will not be at a disadvantage.  Our presumption is that the corporate entity will have access to the evidence, but if there are instances where you do not, or you are legally prohibited from handing it over, then, again, you need to explain that to us.  And know that we will test the accuracy of your assertions.  

We, of course, recognize that we sometimes can obtain evidence that a company cannot.  We often can obtain from third parties evidence that is not available to the company.  Also, we know that a company may not be able to interview former employees who refuse to cooperate in a company investigation.  Those same employees may provide information to us, whether voluntarily or through compulsory process.  Likewise, there are times when, for strategic reasons, we may ask that the company stand down from pursuing a particular line of inquiry.  In these circumstances, the company of course will not be penalized for failing to identify facts subsequently discovered by government investigators.

Finally, remediation includes the company’s overall compliance program as well as its disciplinary efforts related to the specific wrongdoing at issue.  For example, we will consider whether and how the company has disciplined the employees involved in the misconduct.  We will also examine the company’s culture of compliance including an awareness among employees that any criminal conduct, including the conduct underlying the investigation, will not be tolerated.

A well-designed and fully-implemented compliance program is key.  Such a program should have sufficient resources relative to the company’s size to effectively train employees on their legal obligations and to uncover misconduct in its earliest stages.  Compliance personnel should be sufficiently independent so that they are free to report misconduct even when committed by high-ranking officials. 

Because this area is nuanced, the Fraud Section has recently retained an experienced compliance counsel to help assess these programs.  She has many years of experience in the private sector assisting global companies in different industries build and strengthen compliance controls.  We look forward to her insights on issues such as whether the compliance program truly is thoughtfully designed and sufficiently resourced to address the company’s compliance risks and whether proposed remedial measures are realistic and sufficient.  She also will be interacting with the compliance community to seek input about ways we can work together to advance our mutual interest in strong corporate compliance programs.

Let me reiterate: there is no requirement that a company self-disclose, fully cooperate or remediate FCPA offenses, and failure to do those things, or to do them to the standards I have described here, in and of itself, does not mean that charges will be filed against a company any more than it would with respect to an individual.  But when it comes to serious, readily-provable offenses, companies seeking a more lenient disposition on the basis that they took steps to mitigate the offense after it was discovered are on notice of what the Criminal Division looks for when we consider these mitigating factors.

Just as we expect transparency from companies seeking prosecutorial consideration for mitigating an FCPA offense, we are doing our best to act in kind.  We recognize that information about the bases for our corporate guilty pleas and resolutions is an important reference point for companies that are evaluating whether to self-disclose a violation or cooperate. 

In each of our corporate resolutions—be it a guilty plea, NPA or DPA—we aim to provide a detailed explanation of the key factors that led to our decision.  These include a detailed recitation of the misconduct, as publicly admitted by the company and the corporation’s cooperation—if any—and remedial measures.  We usually publicly announce corporate resolutions and pleas, and make the documents available on our website.

We know that the overwhelming majority of companies try to do the right thing the overwhelming majority of the time.  And we applaud the efforts of corporate counsel and executives alike in establishing and enforcing FCPA compliance programs to prevent violations.  I think we can all agree that the FCPA’s ultimate goal – like that of the other criminal statutes we enforce on a daily basis – is not the prosecution and punishment of individuals and companies engaged in bribery as a business practice but rather an end to corruption before it begins.  I would much prefer to report lower figures in terms of FCPA prosecutions and penalties in future years if it meant less corruption were occurring. 

By increasing the size of our FCPA force and by incentivizing early reporting and thorough compliance programs through increased transparency, we are making progress towards that goal.  With the help of companies and their counsel, we can get there sooner.  To that end, we look forward to continuing the dialogue of which this conference is a part. 

November 27, 2015 | Permalink | Comments (0)

Maerki Baumann & Co. AG Pays $24M, Turn Over US Tax Evader Accounts to IRS

Since Aug. 1, 2008, Maerki Baumann had 571 U.S.-related accounts, comprising maximum assets under management of approximately $790 million, including assets of declared accounts.  Maerki Baumann will pay a penalty of $23.92 million.       

Maerki Baumann is a family-owned private bank organized under the laws of Switzerland.  It is headquartered in Zurich, Irs_logoSwitzerland, and has a branch office in Lugano, Switzerland.  In the 1990s, Maerki Baumann developed a relationship with a Swiss referral source that introduced clients to Maerki Baumann primarily from the United States.  This source was affiliated with an insurance company that also deposited with Maerki Baumann pooled assets from its insurance customers.  Maerki Baumann understood that most were U.S. persons.  At some point in the late 1990s or early 2000s, Maerki Baumann also began receiving referrals of U.S. clients from an external asset manager based in the United States.  These referrals included clients with undeclared accounts. 

Although Maerki Baumann had long had U.S. clients, it had no formal U.S. desk or team until 2001, when it consolidated responsibility for U.S. clients into what had been the “Swiss team” and renamed it the “Swiss/U.S. team.”  Maerki Baumann increased its focus on its U.S. cross-border business from 2003 to 2005.  In 2003, Maerki Baumann hired a relationship manager (RM-1) from the U.S./Canada desk at another bank. 

RM-1 introduced Maerki Baumann to another relationship manager (RM-2), with whom RM-1 had previously worked at another bank and who had significant experience servicing U.S. accounts.  Maerki Baumann hired RM-2 in 2005 with the expectation that RM-2 would provide expertise to the U.S. side of Maerki Baumann’s Swiss/U.S. team and actively recruit additional U.S. clients.  By the end of 2005, in addition to the head of the Swiss/U.S. team, the U.S. component of Maerki Baumann’s Swiss/U.S. team consisted of three relationship managers, including RM-1 and RM-2.  The client base of these relationship managers consisted largely of U.S. clients.  Later, these relationship managers were assisted by three junior members of the Swiss/U.S. team.   On approximately 35 occasions, relationship managers traveled to the United States to meet with U.S. clients for the purpose of building and maintaining relationships with these clients.

Maerki Baumann terminated RM-2’s employment in 2008.  In 2011, RM-2 was charged in a federal court in the United States with conspiring to impede and impair the Internal Revenue Service (IRS) in the ascertainment, computation, assessment and collection of U.S. income taxes, in connection with RM-2’s activities at a bank other than Maerki Baumann. 

Maerki Baumann opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared as required by U.S. law.  Maerki Baumann also offered a variety of traditional Swiss banking services, including hold mail instructions and numbered accounts, that it knew could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS.  The combination of hold mail instructions and numbered accounts on undeclared accounts significantly reduced the ability of the IRS to learn the identities of the U.S. persons.

Maerki Baumann also allowed U.S. persons to maintain accounts held in the name of non-operating non-U.S. corporations or other legal entities that were beneficially owned by these U.S. persons.  The jurisdictions in which the entities were incorporated or formed included Liechtenstein, Panama and the British Virgin Islands.  On at least two occasions, relationship managers met directly with the beneficial owners of the Maerki Baumann accounts held by the entities.

Between 2004 and 2008, on approximately a monthly basis (but sometimes more often), RM-1 received from U.S. clients checks ranging from just under $10,000 to $85,000, which were drawn on U.S. company accounts in California, for deposit into accounts beneficially owned by those U.S. clients or their designees.  The correspondence accompanying the checks stated that the checks were for “materials purchased” and instructed the relationship manager to “process the purchase orders as needed,” and many of the checks themselves bore the notation “see purchase order.”  However, there were no purchase orders attached, and Maerki Baumann was never provided with any purchase orders.  Additionally, RM-1’s notes state that certain checks were for under $10,000 “in order to avoid any unnecessary attention.”  Likewise, with respect to at least two U.S.-related accounts, relationship managers knew between 2003 and 2005 that the client was structuring the transactions to avoid currency transaction reporting requirements.

Relationship managers communicated or discussed communicating with U.S. clients by confidential means.  For example, in October 2006, one relationship manager advised a client that if there was a need for urgent contact, he would send the client a card stating “Greetings from [relationship manager].”  In another instance, in June 2009, a client’s correspondence to a relationship manager stated, “If there are any questions, please phone me on my cell phone or email me with our usual confidentiality.”  In some instances, the accountholders had disclosed to relationship managers that their accounts were undeclared.

Maerki Baumann and its relationship managers also:

  • Permitted assets in an account held by a known U.S. person to be transferred in 2006 to a new account held by a life insurance company, known as an “insurance wrapper”;

  • Processed requests from U.S. taxpayers for cash or precious metal withdrawals, thus not triggering any transaction reporting requirements;

  • Permitted a withdrawal of approximately one million Swiss francs from a U.S. client’s account after the client refused to declare money in the account in the United States;

  • Delivered cash withdrawals to U.S. clients in Switzerland; and

  • Offered credit, debit or travel cash cards, which facilitated the access to or use of undeclared funds on deposit at Maerki Baumann.

By participating in the Swiss Bank Program, Maerki Baumann has committed to cooperate with the U.S. government in its efforts to identify U.S. persons who engaged in tax evasion and/or fraud.  Among other actions, Maerki Baumann has provided full cooperation to allow the United States to be able to request and obtain from Switzerland through the 1996 Convention and the 2009 Protocol, once ratified, the bank files of non-tax compliant U.S. persons.  This will result in the United States receiving files identifying U.S. persons who previously held undeclared accounts at Maerki Baumann, directly or through entities.

Since Aug. 1, 2008, Maerki Baumann had 571 U.S.-related accounts, comprising maximum assets under management of approximately $790 million, including assets of declared accounts.  Maerki Baumann will pay a penalty of $23.92 million.       

November 27, 2015 in FATCA | Permalink | Comments (0)

FATCA GIINs - By The Numbers: Region, Country, and IGA Status

This month, Haydon Perryman and I review the change over the past year, and the immediate previous three months, for FATCA financial institution registrations.  The November 1, 2015 GIIN list contains 177,147 registrations from 226 countries and jurisdictions. Of these November 2015 registrations 84 percent were from Model 1 IGAs that had been either signed or recognized as agreed in substance by the IRS. Approximately 19 percent (33,348) of these total registrations of 177,147 were from Cayman Islands firms, and 45 percent of the total from the U.K. and its Crown dependencies and overseas territories.

Origin Registrations (November 1, 2014) Registrations (November 1, 2015)
Model 1A IGA



Model 1B IGA



Model 2 IGA



U.S. & U.S. Territories









Contrast this year's registration of 177,147 with last November's of 116,104.  Now contrast the difference from the number of Legal Entity Identifiers (LEIs) issued versus GIINs issued.  The number of LEIs is interesting because theoretically it should be relatively close to the number of GIIN registrations. As of September 19, 2015, over 393,872 entities from 189 countries had obtained LEIs, twice as many than GIINs as of November 1, 2015.

The IRS stated that “… the full FFI list is expected to be less than 500,000 records.” Based on upon industry discussions and a review of industry literature of financial institution compliance officers, the Big 4, and upon revenue authority estimates, it is reasonable to state that approximately 500,000 entities are impacted by Chapter 4 withholding and need to register for a GIIN. Literature actually places the range of impacted entities at a minimum half million to a maximum of 1,000,000.  Many U.K. financial industry compliance officers, agree with the HMRC’s estimate of 75,000 entities requiring registration for a GIIN.  Thus, it is reasonable to infer that approximately two-thirds of U.K. FFIs still must register to obtain a GIIN.  Based on the mere increase of FFI registrations of approximately 60,000 to 177,147 since November 1, 2014 and upon industry discussions, upon the IRS and U.K. revenue authority estimates, it is reasonable to conclude that global FATCA registration compliance is at the time of publication less than 30 percent.

But for the Cayman Islands (33,348), FATCA registration remains low over the past year in nearly every country relative to the number of potential entities for registration. Only 5,047 Swiss entities, up from 4,586 last year, have registered, which when contrasted to Cayman Islands and the U.K. seems measly.

The BRIC countries have picked up FFI registration steam over the past year. India and China are well behind Brazil though  with only 400 FFIs registering from China moving it from 609 to 1,082, and 600 additional FFI registrations from India moving it from 393 to 910. Brazil experienced the largest amount of registrations, jumping approximately 3,000 from 2,841 to 5,709, whereas less than  400 Russian entities registered (from  961 to 1,306).

NAFTA has not fared better than the BRIC block given the closer relationship to the U.S. Canada’s November 1 GIIN list of 4,549 represents an additional 1,500 registrations since last year (3,043), whereas Mexico’s 80 additional registrations since last year moved it from  only 522 FATCA registered institutions to 605. Only 6,868 of these total 177,147 registrations are from the 131 non-IGA countries.

FATCA IGA Scenarios


2015 GIINs




Sept 2015 GIINs


Model 1A IGA





Model 1B IGA





Model 2 IGA















US Territory










Breaking down the 177,147 current GIIN registrations by region:

  • EMEA 93,128 (53 percent)
  • AMER 60,425 (34 percent)
  • APAC 22,633 (13 percent)
  • “Other” 961 (1 percent)

It would appear that APAC, the Middle East and Africa are underrepresented in terms of GIIN registrations.  BRIC Countries represent 5 percent of the total and NAFTA represents 3 percent of the total. The 34 OECD Members represent 47 percent of the overall total.

The number of jurisdictions treated as having an IGA place in accordance with US Treasury rules remains at 112.

Only  6,868 of these 177,147 registrations are from the 131 countries that have not had an IGA announced with the U.S. Recipients of withholdable payments in these countries and jurisdictions have thus borne the 30 percent withholding of Chapter 4. Albeit for the many countries and jurisdictions that do not have a double tax agreement with the U.S., and considering the phase in applicability of Chapter 4 withholding upon grandfathered obligations and upon gross proceeds, the actual Chapter 4 withholding has little impact at this moment. When Chapter 4 applies to all the portfolio interest of currently grandfathered obligations and upon gross proceeds, neither upon which Chapter 3 withholding applies, then presumably FFI GIIN registration and FATCA compliance will sharply jump. Some analysts forecast a divestment from the U.S. by these countries. But even if that case scenario comes to pass, the impact of such divestment relative to the size of the U.S. foreign direct investment (“FDI”) based upon U.S. liquidity, perceived stability, and investor protection, will be de minimis.

Consequently, global FATCA registration compliance is, as of November 1, 2015, only approximately 20 percent. But for the Cayman Islands (33,348), FATCA registration is low in every country relative to the number of potential entities for registration. Only 5,047 Swiss entities have registered this year, up from 4,586 (November 1, 2014), which when contrasted to Cayman Islands and the U.K. seems measly.

A Deloitte survey, published August 12, 2014 in the Wall Street Journal, of 110 CFOs of large North American companies for which knowledge of and compliance with FATCA should be at its highest found that only one-third of CFOs had begun the basic step of FATCA compliance, which is the classification of internal entities. Only eight percent of CFOs had actually completed the necessary processes to comply with Chapter 4 withholding. Based on the lack of local implementation regulations or guidance by most revenue authorities around the world (e.g. Turkey, India, China), it is unlikely that a goal of 50 percent GIIN registration, much less of FATCA compliance, can be achieved in 2015.

GIIN List (2014) Total Registrations  
June 77,354  
July 82,994  
August 95,239  
September 99,861  
October 104,344  
November 116,104  
December 122,881  
January 2015 147,043  
February 153,797  
March 156,276  
April 160,010  
May 162,610  
June 165,461  
July 168,239  
August 171,109  
September 173,346  
October 175,543  
November 177,147  

For further GIIN analysis by country and by entity type, see Byrnes' Guide to FATCA Compliance.

November 27, 2015 in FATCA | Permalink | Comments (0)

Thursday, November 26, 2015

San Diego Federal Court Enjoins Man Posing as Attorney and CPA from Promoting Bogus Tax Schemes, Preparing Returns

A federal court in San Diego, California, has permanently barred Lawrence Preston Siegel from preparing federal tax returns for others, providing tax advice for compensation or any Irs_logopromise of compensation and working for any business that provides tax advice or prepares tax returns, the Justice Department announced.  Siegel is also a fugitive from the State of California, wanted on a 20-count criminal complaint, filed in 2014, charging him with Medi-Cal fraud, grand theft, forgery, identity theft, financial dependent adult abuse and tax evasion. 

Judge Gonzalo P. Curiel of the U.S. District Court for the Southern District of California entered the permanent injunction on Nov. 9, after Siegel failed to appear to defend the civil case. 

The civil complaint alleges that Siegel impersonated licensed California attorneys and used multiple aliases, including Larry Lave and Yehuda Lave, to falsely represent that he is a licensed attorney and CPA in order to recruit customers and implement his tax fraud schemes.  According to the complaint, Siegel resigned from the California bar in 1994 and lost his CPA license in 1997 after he was convicted of federal crimes, including tax evasion.  Siegel allegedly never regained either accreditation. 

The complaint alleges that among his tax fraud schemes, Siegel falsely advised his customers, typically high earners who own profitable businesses, that they can establish companies in another state, usually Nevada, then treat their California home as an out-of-state corporate office.  Siegel claimed that doing so would transform a vast array of non-deductible personal expenses into tax deductible business expenses, according to the complaint.  The complaint details how Siegel boasted about this tax fraud scheme in e-mails, including one where Siegel falsely claimed that his customers are entitled to free housing as tax-free compensation from their out-of-state companies and that “[t]he housing can [b]e luxurious and cost thousands a month” because “[t]here is an assumption that corporations don’t waste money.”

In conjunction with his tax fraud schemes, Siegel allegedly prepared customer tax returns.  In some instances, Siegel filed tax returns without reviewing them with his customers or obtaining their permission to file them, according to the complaint.  Siegel is alleged to have fraudulently claimed customers’ personal purchases as deductible business expenses on tax returns he prepared.  For example, the complaint states that Siegel deducted on one couple’s tax returns purchases at Tiffany & Company, Royal Caribbean Cruise Lines, Louis Vuitton and Princess Cruise Lines.  Siegel allegedly attempted to conceal these fraudulent deductions from the Internal Revenue Service (IRS) by lumping them together and reporting them as large expenses for “supplies” or “medical records and supplies.”

According to the complaint, Siegel also attempted to delay and obstruct IRS examinations of his customers who entered into Siegel’s tax fraud schemes.  Siegel allegedly provided false corporate documents to the IRS in order to deceive auditors, produced bogus contracts to IRS auditors and lied to IRS officials during U.S. Tax Court litigation when asked to confirm information on behalf of his customers.

Return preparer fraud is one of the IRS’s Dirty Dozen Tax Scams for 2014

November 26, 2015 in Tax Compliance | Permalink | Comments (0)

IRS Upgrades and Enhances FATCA Registration System

The Internal Revenue Service has upgraded the Foreign Account Tax Compliance Act (FATCA) Online Registration System, FATCA_rollenabling sponsoring entities to provide additional required details. The enhancements also aid users' ability to update their information, download registration tables and alter their financial institution type. The upgrade also includes an updated country/jurisdiction list.

FATCA requires sponsored entities (including those governed by an IGA) to have their own Global Intermediary Identification Number (GIIN) for FATCA reporting and withholding purposes by Dec. 31, 2016. To facilitate this requirement, the FATCA Online Registration System added features to enable sponsoring entities to add their sponsored entities and, if applicable, sponsored subsidiary branches. These can be added either individually or by submitting a file containing multiple records.

The IRS also provides a Microsoft Excel-based Sponsored Entity Data Preparation Tool for users choosing the multiple record file upload option. As a result of the new sponsored entities and sponsored subsidiary branches, the values available for the GIIN have expanded.  See the Instructions for Sponsored Entity Data Preparation Tool for XML File for the definitions of sponsored entities and sponsored subsidiary branches.

The update to the system occurred on November 16. The improvements to the system and additional features to manage user accounts include the following:  

• New questions have been added, such as asking foreign financial institutions to indicate their tax Identification number in their country or jurisdiction, if they have one. Other questions relate to identifying the common parent entity of the expanded affiliated group.

• Certain financial institutions can now change their “Financial Institution Type.”

• Member financial institutions can now transfer to another expanded affiliated group without having to cancel their current agreement and re-register.

Following the change or transfer, a new FATCA account will be created with existing registration information, including branches.  

The FATCA Online Registration System User Guide and FAQs have been updated for these enhancements. Additional information on this system is available at

November 26, 2015 in FATCA | Permalink | Comments (0)

Wednesday, November 25, 2015

Switzerland Final Adopts New AML Law

The Swiss Federal Council adopted the Anti-Money Laundering Ordinance (AMLO). It will enter into force on 1 January 2016.

In February 2012, the Financial Action Task Force (FATF) published the revised international standards concerning the combating of money laundering and terrorist financing (FATF Cash3recommendations). Parliament adapted various laws to these standards with the Federal Act for Implementing the Revised Financial Action Task Force (FATF) Recommendations of 12 December 2014. The approved amendments to the Anti-Money Laundering Act (AMLA) and the Swiss Civil Code (CC) require additional remarks and adjustments at ordinance level.

The new due diligence obligations and reporting duties for traders set out in the AMLA will be fleshed out in the new AMLO. They will be applied when traders accept cash payments of more than CHF 100,000 in the course of trading activities. At the same time, the existing Federal Council Ordinance on the Professional Practice of Financial Intermediation (PFIO) will be written into the AMLO. Moreover, the new legal provisions on the reporting system for financial intermediaries will be implemented by amending the Ordinance on the Money Laundering Reporting Office Switzerland (MROSO). Finally, Parliament also decided to improve transparency in the law on foundations whereby ecclesiastical foundations will now also have to be registered in the commercial register. For ecclesiastical foundations which already exist, the details of this obligation will be specified in greater detail in the Commercial Register Ordinance.

The new ordinance provisions will enter into force at the same time as the provisions of the corresponding Act on 1 January 2016.

November 25, 2015 in AML | Permalink | Comments (0)

BNP, KBL & CIC Pay $81M in Penalties, Enter Non Prosecution Agreements With IRS

The Department of Justice announced today that BNP Paribas (Suisse) SA (BNPP), KBL (Switzerland) Ltd. (KBL Switzerland) and Bank CIC have reached resolutions under the department’s Swiss Bank Program. These banks will collectively pay penalties totaling more than $81 million and continue to cooperate with the department.
 Since Aug. 1, 2008, BNPP held and managed approximately 760 U.S.-related accounts with a peak value of approximately Irs_logo$1.2 billion in assets under management. BNPP will pay a penalty of $59.783 million.  Since Aug. 1, 2008, KBL Switzerland maintained 277 U.S.-related accounts having a maximum aggregate dollar value in excess of $255 million. KBL Switzerland will pay a penalty of $18.792 million.  Since Aug. 1, 2008, Bank CIC had 261 U.S.-related accounts, comprising approximately $228 million in assets under management.  Bank CIC will pay a penalty of $3.281 million.
BNPP has had a presence in Switzerland since 1872.  BNPP is headquartered in Geneva, Switzerland, and has branches in Zurich, Basel and Lugano, Switzerland.  In 2008, BNP Paribas Bank Group agreed to acquire the worldwide operations of Fortis Bank, which was at the time the largest bank in Belgium.  This merger closed in May 2010, and its terms required BNPP to absorb Fortis Banque (Suisse) SA.

BNPP opened and maintained accounts for U.S. taxpayers in the name of non-U.S. corporations, foundations, trusts or other legal entities, in which U.S. taxpayers concealed their beneficial ownership of the accounts.  BNPP readily accepted accounts in which external trust companies created and administered offshore structures incorporated or based in offshore locations such as the British Virgin Islands, Panama, Liechtenstein and Liberia, for certain of BNPP’s U.S. clients.  In certain instances, BNPP took instructions directly from U.S. beneficial owners with power of attorney over the account, including instructions for cash withdrawals, with the funds going directly to the true U.S. beneficial owner. 

BNPP also has a Corporate and Institutional Banking (CIB) business line.  CIB clients use the expertise of BNPP for specific commercial transactions, and CIB does not provide private banking services.  CIB maintained a small number of U.S.-related accounts.  In one case, a wealth management relationship manager omitted the existence of a CIB client’s U.S. passport in opening a wealth management account for that client.

Starting in 2003, BNPP issued a policy requiring U.S. residents opening new accounts to provide an IRS Form W-9 and certification that the person was aware of, and fully complied with, tax requirements pertaining to foreign accounts maintained by U.S. persons.  BNPP also held mandatory training sessions in 2005 and 2007 to ensure that wealth management employees were aware of and followed its policies for U.S. persons.  Despite these policies, BNPP disregarded evidence that many of the accounts were not in fact properly declared, facilitating the tax avoidance schemes of accountholders.

Certain employees of BNPP understood that certain U.S. taxpayers who maintained accounts at BNPP were not complying with their U.S. reporting obligations, and BNPP offered a variety of traditional Swiss banking services that it knew could assist, and did in fact assist, certain U.S. clients in the concealment of assets and income from the Internal Revenue Service (IRS).  For example, BNPP maintained 338 numbered accounts and agreed to hold bank statements and other mail.

BNPP also processed requests for cash withdrawals by U.S. taxpayers from accounts being closed.  For example, in early 2012, after part of an account was transferred to a bank in Malaysia, a BNPP employee gave instructions for the withdrawal of the balance of the account in the amount of 238,000 Swiss francs.  In November 2009, in light of BNPP’s policy that non-compliant U.S. accounts be closed, an accountholder received permission to withdraw $731,000 in cash, with several employees coordinating the withdrawal so that the accountholder need not “waste time at the cash desk.”  And in August and September of 2009, after a BNPP employee informed an accountholder that BNPP had adopted a new U.S.-related account policy, the employee and accountholder agreed that the client would come to BNPP before Sept. 5, 2009, to withdraw the remaining account balance and close the account. Instructions were given to allow the client to withdraw $255,838, as well as 49,233 euros.

Throughout its participation in the Swiss Bank Program, BNPP provided full cooperation to the department.  BNPP described in detail the structure of its U.S. cross-border business, including but not limited to the policies BNPP put in place to comply with U.S. law, a summary of the top 20 U.S.-related accounts by assets under management value, a redacted summary of external asset managers and relationship managers with U.S.-related accounts by assets under management and substantial information about U.S.-related accounts associated with external asset managers and relationship managers.  BNPP provided a list of the names and functions of all individuals who structured, operated or supervised the cross-border business at BNPP and also provided relevant information concerning its relationship managers.

Since Aug. 1, 2008, BNPP held and managed approximately 760 U.S.-related accounts with a peak value of approximately $1.2 billion in assets under management. BNPP will pay a penalty of $59.783 million.

KBL Switzerland is based in Geneva, with branches in Zurich and Lugano, Switzerland.  An additional branch located in Lausanne closed in 2014.  KBL Switzerland implemented a strategy from 2009 through May 2010 that substantially sought to increase KBL Switzerland’s assets under management and the business that KBL Switzerland did with external asset managers.  The implementation of this strategy led KBL Switzerland to open and maintain significant numbers of U.S.-related accounts, including some accounts for U.S. taxpayers who had been exited from UBS, Credit Suisse or other banks.

KBL Switzerland opened and maintained accounts for certain U.S. taxpayers in the names of corporations, foundations, trusts or other legal entities that were organized in non-U.S. jurisdictions, such as Panama, the British Virgin Islands or Liechtenstein.  For many of these accounts, KBL Switzerland accepted IRS Forms W-8BEN or substitute forms that falsely represented that the legal entities that owned the structured accounts had no U.S. taxpayer beneficial owners.  KBL Switzerland knew, or had reason to know, that the true beneficial owners of these accounts were U.S. taxpayers.  KBL Switzerland also knew, or had reason to know, that certain of these U.S. taxpayers were utilizing the accounts for personal purposes without formal corporate authorization.

In one instance, a KBL Switzerland relationship manager assured a U.S. taxpayer client, who had not provided a Form W-9, that KBL Switzerland would not reveal his identity to the United States.  In a separate instance, a different KBL Switzerland relationship manager assured a U.S. taxpayer client that, because of Swiss bank secrecy laws, Switzerland would not freely exchange account information with the United States.  And in at least one instance, a KBL Switzerland relationship manager advised a U.S. taxpayer client to avoid bringing account information into the United States.

On the instructions of the U.S. taxpayer clients, KBL Switzerland moved or restructured the assets of U.S.-related accounts in ways that concealed the U.S. nature of those accounts.  In late 2009 and early 2010, KBL Switzerland followed the instructions of two external asset managers, concerning four separate U.S.-related accounts that were directly held by U.S. taxpayer clients of KBL Switzerland, to restructure the assets of the accounts into new insurance-policy accounts.  These insurance wrapper accounts were titled in the name of a Liechtenstein insurance company for the benefit of the same underlying U.S. taxpayer clients with the same underlying assets.  Restructuring the form in which their assets were held at KBL Switzerland allowed these U.S. taxpayers to further hide their identities and undeclared accounts from the IRS and U.S. law enforcement. 

In 2012, KBL Switzerland briefly implemented a flawed account closing policy that had the unintended effect of closing a number of U.S.-related accounts through substantial and/or successive asset withdrawals.  In one of these instances, KBL Switzerland permitted a U.S. taxpayer client to close an account through a single cash withdrawal of nearly $2 million. In another one of these instances, KBL Switzerland allowed a U.S. taxpayer client to close a structured entity account by using assets in the account to purchase gold worth nearly $200,000, which the U.S. taxpayer client subsequently withdrew in closing the account.

On request of its clients, including undeclared U.S. taxpayers, KBL Switzerland provided Swiss travel cash cards issued by third parties.  KBL Switzerland would fund these travel-cash cards with assets maintained in accounts belonging to U.S. taxpayer clients, which enabled U.S. taxpayer clients to access the assets of undeclared accounts wherever they chose, including in the United States.  KBL Switzerland also permitted U.S. taxpayer clients to access and utilize the value of assets held in undeclared accounts through loans that were secured by their undeclared assets on deposit with KBL Switzerland.

KBL Switzerland committed to providing full cooperation to the U.S. government and has made timely and comprehensive disclosures regarding its U.S. cross-border business.  Among other things, KBL Switzerland has described in detail the structure of its cross-border business for U.S.-related accounts including, but not limited to:

  • The policies and lack of oversight that contributed to the misconduct committed by KBL Switzerland relationship managers and their supervisors;

  • Data on desks and employees with elevated concentrations of U.S.-related accounts;

  • Information on key external asset managers that had significant involvement with U.S.-related accounts;

  • The names and positions of compliance officers and senior managers; and

  • Written narratives on its largest and most problematic U.S.-related accounts.

Since Aug. 1, 2008, KBL Switzerland maintained 277 U.S.-related accounts having a maximum aggregate dollar value in excess of $255 million. KBL Switzerland will pay a penalty of $18.792 million.

Bank CIC is a subsidiary of the French financial group Crédit Mutuel-CIC, one of the largest banking groups in France.  In addition to its main office in Basel, Bank CIC has eight branches, all in Switzerland: Lausanne, Zurich, Geneva, Lugano, Locarno, Neuchatel, Fribourg and Sion.

Although Bank CIC did not target U.S. taxpayer-clients, many of Bank CIC’s front-office personnel had some exposure to at least one or more U.S.-related accounts as part of their general client service functions. Periodically, U.S. clients were accepted as walk-ins or referred to Bank CIC by other clients.

Bank CIC offered a variety of traditional Swiss banking services, including hold mail and numbered accounts, that it knew or should have known could assist, and did in fact assist, U.S. clients in the concealment of assets and income from the IRS.  A Bank CIC manager or relationship manager communicated with a U.S. taxpayer client through methods such as facsimile and calling prepaid mobile phones at the U.S. taxpayer-client’s request.  Bank CIC also allowed accounts with U.S. beneficial owners to be held in the name of non-U.S. entities.

Since Aug. 1, 2008, Bank CIC had 261 U.S.-related accounts, comprising approximately $228 million in assets under management.  Bank CIC will pay a penalty of $3.281 million.

November 25, 2015 in FATCA | Permalink | Comments (0)

Tuesday, November 24, 2015

FFIEC Risk Mitigation for Cyber Attacks Involving Extortion

The Federal Financial Institutions Examination Council (FFIEC) members issued a statement alerting financial institutions to the increasing frequency and severity of cyber attacks FFIECinvolving extortion.  The statement describes steps financial institutions should take to respond to these attacks and highlights resources institutions can use to mitigate the risks posed by such attacks.

Cyber attacks against financial institutions to extort payment in return for the release of sensitive information are increasing. Financial institutions should address this threat by conducting ongoing cybersecurity risk assessments and monitoring of controls and information systems. In addition, financial institutions should have effective business continuity plans to respond to this type of cyber attack to ensure resiliency of operations.

Financial institutions are also encouraged to notify law enforcement and their primary regulator or regulators of a cyber attack involving extortion.

Cyber criminals and activists use a variety of tactics, such as ransomware, denial of service (DoS), and theft of sensitive business and customer information to extort payment or other
concessions from victims.  In some cases, these attacks have caused significant impacts on a businesses’ access to data and ability to provide services. Other businesses have incurred serious damage through the release of sensitive information.


Financial institutions should ensure that their risk management processes and business continuity planning address the risks from these types of cyber attacks, consistent with the risk management practices identified in previous FFIEC joint statements and the FFIEC Information Technology Examination Handbook , specifically the “Business Continuity Planning” and “Information Security” booklets. Related FFIEC joint statements are titled “Destructive Malware,” “Cyber Attacks Compromising Credentials,” and “Distributed Denial-of-Service (DDoS) Cyber-Attacks, Risk Mitigation, and Additional Resources.”

Consistent with FFIEC and member guidance, financial institutions should consider taking the following steps:

  • Conduct ongoing information security risk assessments
  • Securely configure systems and services.
  • Protect against unauthorized access.
  • Update information security awareness and training programs, as necessary, to include cyber attacks involving extortion.
  • Review, update, and test incident response and business continuity plans periodically.
  • Participate in industry information-sharing forums.
  • Perform security monitoring, prevention, and risk mitigation.
  • Implement and regularly test controls around critical systems.

Download FFIEC_Cyber_Attacks_Involving_Extortion


November 24, 2015 in Financial Regulation | Permalink | Comments (0)

Monday, November 23, 2015

US Will Revoke Passports of Tax Debtors from Jan 1, 2016

The following amendment to the US Tax Code is in the Conference of the House of Representatives and of the Senate and is expected to be signed into law this year.

(a) In General.—Subchapter D of chapter 75 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:


“(a) In General.—If the Secretary receives certification by the Commissioner of Internal Revenue that any individual has a seriously delinquent tax debt in an amount in excess of $50,000, the Secretary shall transmit such certification to the Secretary of State for action with respect to denial, revocation, or limitation of a passport pursuant to section 52102(d) of the Transportation Funding Act of 2015.

“(b) Seriously Delinquent Tax Debt.—For purposes of this section, the term seriously delinquent tax debt means an outstanding debt under this title for which a notice of lien has been filed in public records pursuant to section 6323 or a notice of levy has been filed pursuant to section 6331, except that such term does not include—

“(1) a debt that is being paid in a timely manner pursuant to an agreement under section 6159 or 7122, and

“(2) a debt with respect to which collection is suspended because a collection due process hearing under section 6330, or relief under subsection (b), (c), or (f) of section 6015, is requested or pending.

“(c) Adjustment For Inflation.—In the case of a calendar year beginning after 2016, the dollar amount in subsection (a) shall be increased by an amount equal to—

“(1) such dollar amount, multiplied by

“(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year, determined by substituting calendar year 2015 for calendar year 1992 in subparagraph (B) thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next highest multiple of $1,000.”.

(b) Clerical Amendment.—The table of sections for subchapter D of chapter 75 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

“Sec. 7345. Revocation or denial of passport in case of certain tax delinquencies.”.

(c) Authority For Information Sharing.—

(1) IN GENERAL.—Subsection (l) of section 6103 of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph:


“(A) IN GENERAL.—The Secretary shall, upon receiving a certification described in section 7345, disclose to the Secretary of State return information with respect to a taxpayer who has a seriously delinquent tax debt described in such section. Such return information shall be limited to—

“(i) the taxpayer identity information with respect to such taxpayer, and

“(ii) the amount of such seriously delinquent tax debt.

“(B) RESTRICTION ON DISCLOSURE.—Return information disclosed under subparagraph (A) may be used by officers and employees of the Department of State for the purposes of, and to the extent necessary in, carrying out the requirements of section 52102(d) of the Transportation Funding Act of 2015”..”.

(2) CONFORMING AMENDMENT.—Paragraph (4) of section 6103(p) of such Code is amended by striking or (22) each place it appears in subparagraph (F)(ii) and in the matter preceding subparagraph (A) and inserting (22), or (23).

(d) Authority To Deny Or Revoke Passport.—

(1) DENIAL.—

(A) IN GENERAL.—Except as provided under subparagraph (B), upon receiving a certification described in section 7345 of the Internal Revenue Code of 1986 from the Secretary of the Treasury, the Secretary of State shall not issue a passport to any individual who has a seriously delinquent tax debt described in such section.

(B) EMERGENCY AND HUMANITARIAN SITUATIONS.—Notwithstanding subparagraph (A), the Secretary of State may issue a passport, in emergency circumstances or for humanitarian reasons, to an individual described in such subparagraph.


(A) IN GENERAL.—The Secretary of State may revoke a passport previously issued to any individual described in paragraph (1)(A).

(B) LIMITATION FOR RETURN TO UNITED STATES.—If the Secretary of State decides to revoke a passport under subparagraph (A), the Secretary of State, before revocation, may—

(i) limit a previously issued passport only for return travel to the United States; or

(ii) issue a limited passport that only permits return travel to the United States.

(3) HOLD HARMLESS.—The Secretary of the Treasury and the Secretary of State shall not be liable to an individual for any action with respect to a certification by the Commissioner of Internal Revenue under section 7345 of the Internal Revenue Code of 1986.

(e) Revocation Or Denial Of Passport In Case Of Individual Without Social Security Account Number.—

(1) DENIAL.—

(A) IN GENERAL.—Except as provided under subparagraph (B), upon receiving an application for a passport from an individual that either—

(i) does not include the social security account number issued to that individual, or

(ii) includes an incorrect or invalid social security number willfully, intentionally, negligently, or recklessly provided by such individual,

the Secretary of State is authorized to deny such application and is authorized to not issue a passport to the individual.

(B) EMERGENCY AND HUMANITARIAN SITUATIONS.—Notwithstanding subparagraph (A), the Secretary of State may issue a passport, in emergency circumstances or for humanitarian reasons, to an individual described in subparagraph (A).


(A) IN GENERAL.—The Secretary of State may revoke a passport previously issued to any individual described in paragraph (1)(A).

(B) LIMITATION FOR RETURN TO UNITED STATES.—If the Secretary of State decides to revoke a passport under subparagraph (A), the Secretary of State, before revocation, may—

(i) limit a previously issued passport only for return travel to the United States; or

(ii) issue a limited passport that only permits return travel to the United States.

(f) Effective Date.—The provisions of, and amendments made by, this section shall take effect on January 1, 2016.


November 23, 2015 in Tax Compliance | Permalink | Comments (1)

Disaster Risk Financing: A global survey of practices and challenges

This book provides an overview of the disaster risk assessment and financing practices of a broad range of economies. It draws on the G20/OECD Framework for Disaster Risk Disaster-risk-financing_9789264234246-en
Assessment and Risk Financing and is based on a survey covering 29 economies.  

Recent years have seen a range of natural and man-made catastrophes affecting a large number of both developed and developing economies around the globe. These catastrophes have generated a broad range of direct and indirect impacts on all parts of society, including loss of life and damage to public and private property and infrastructure as well as fiscal impacts arising from recovery and reconstruction expenditures and decreased tax revenues. In many economies, particularly low income economies, annual disaster losses account for a significant share of Gross Domestic Product (GDP).

Executive summary
Financial management of disaster risks
Assessment of disaster risks, financial vulnerabilities and the impact of disasters
Private disaster risk financing tools and markets and the need for financial preparedness
Government compensation, financial assistance arrangements and sovereign risk financing strategies
Key priorities for strengthening financial resilience


November 23, 2015 in OECD | Permalink | Comments (0)

Sunday, November 22, 2015

Russian Federal Tax Service publishes draft blacklist

The Russian Federal Tax Service published on the official web-site for information disclosure ( the first list of states and territories that do not exchange information for tax purposes with Russia or information exchange with which did not meet Russia’s expectations (the "blacklist"). The blacklist may become effective from January 1, 2016.

November 22, 2015 in Financial Regulation | Permalink | Comments (0)

Saturday, November 21, 2015

Financial Regulators Release Revised Management Booklet

The Federal Financial Institutions Examination Council (FFIEC) members today issued a revised Management booklet, which is part of the FFIEC Information Technology Examination Handbook (IT Handbook).   Download FFIEC_IT_Examination_Management_Booklet_2015

The Management booklet, including the examination procedures, has been substantially revised. The booklet outlines the principles of sound governance and, more specifically, information technology (IT) governance. The booklet explains how IT risk management relates to enterprise-wide risk management and governance. FFIEC

The updated examination procedures assist examiners in evaluating the following areas:

  • IT governance as part of overall governance in financial institutions.
  • IT risk management as part of enterprise-wide risk management in financial institutions.

Other relevant changes include:

  • Incorporation of cybersecurity concepts as part of information security.
  • Incorporation of management-related concepts from other booklets of the IT Handbook.
  • Augmentation and further delineation of the stages of the IT risk management process, including risk identification, measurement, mitigation, monitoring, and reporting.

The IT Handbook is available at

November 21, 2015 in Financial Regulation | Permalink | Comments (0)

Friday, November 20, 2015

Two Former Rabobank Traders Convicted for Manipulating U.S. Dollar, Yen LIBOR Interest Rates

A federal jury convicted two former Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. Justice logo(Rabobank) derivative traders – including the bank’s former Global Head of Liquidity & Finance in London – today for manipulating the London InterBank Offered Rates (LIBOR) for the U.S. Dollar (USD) and the Yen, benchmark interest rates to which trillions of dollars in interest rate contracts were tied.  Five former Rabobank employees have now been convicted in the Rabobank LIBOR investigation.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division and Assistant Director in Charge Paul Abbate of the FBI’s Washington Field Office made the announcement.

“Today’s verdicts illustrate the department’s successful efforts to hold accountable bank executives responsible for this global fraud scheme,” said Assistant Attorney General Caldwell.  “This investigation—which also resulted in the recent conviction of a bank executive in the U.K.—exemplifies the department’s work with our international partners to protect our global markets from fraud.  The verdicts also demonstrate the department’s ongoing efforts to hold individuals who use their corporate positions to commit fraud personally responsible for their actions.”

“The department will continue to pursue aggressively those involved in illegal schemes that undermine the integrity of financial markets,” said Assistant Attorney General Baer.  “And we will hold individuals criminally accountable for directing illegal corporate behavior.”

“These convictions make clear that bank executives and traders will be held accountable for manipulating world interest rates for their own personal benefit,” said Assistant Director in Charge Abbate.  “Today’s verdict is a testament to the dedication of the special agents, analysts and prosecutors who worked tirelessly to uncover manipulation and fraud in the global financial system.”

After a four-week trial, a jury in the Southern District of New York found Anthony Allen, 44, of Hertsfordshire, England, and Anthony Conti, 46, of Essex, England, guilty of conspiracy to commit wire and bank fraud and substantive counts of wire fraud. 

As the trial evidence showed, LIBOR is an average interest rate, calculated based upon submissions from leading banks around the world and reflecting the rates those banks believe they would be charged if borrowing from other banks.  At the time relevant to the charges, LIBOR was calculated for 10 currencies at 15 maturities, ranging from overnight to one year, and was published by the British Bankers’ Association (BBA), a London-based trade association, based on submissions from a panel of 16 banks, including Rabobank.  Allen, Conti and Paul Robson, who previously pleaded guilty to the conspiracy charge, each determined Rabobank’s LIBOR submissions on various occasions.

LIBOR serves as the primary benchmark for short-term interest rates globally and is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products.  Rabobank invested in various derivatives contracts that were directly affected by the relevant LIBOR rates on a certain dates.  If the relevant LIBOR moved in the direction favorable to the defendants’ positions, Rabobank and the defendants benefitted at the expense of the counterparties.  When LIBOR moved in the opposite direction, the defendants and Rabobank stood to lose money to their counterparties.

Evidence at trial established that Allen, who was Rabobank’s global head of liquidity and finance and the manager of the company’s money market desk in London, oversaw a system in which Rabobank employees who traded in these LIBOR-linked derivative products influenced the employees who submitted Rabobank’s LIBOR contributions to the BBA.  These traders asked Allen, Conti, Robson and others to submit LIBOR contributions that would benefit the traders’ or the banks’ trading positions. 

Sentencing is scheduled for March 10, 2016.

In addition to Allen and Conti, three other former Rabobank employees have been convicted in the Rabobank LIBOR investigation.  Robson, Lee Stewart and Takayuki Yagami each pleaded guilty to one count of conspiracy in connection with their roles in the scheme.  Two other former Rabobank employees, Tetsuya Motomura, 42, of Tokyo, and Paul Thompson, 48, of Dalkeith, Australia, have also been charged.  Rabobank entered into a deferred prosecution agreement with the department on Oct. 29, 2013, and agreed to pay a $325 million penalty to resolve violations arising from Rabobank’s LIBOR submissions.

The case was investigated by special agents, forensic accountants and intelligence analysts in the FBI’s Washington Field Office.  The prosecution is being handled by Senior Litigation Counsel Carol L. Sipperly and Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Trial Attorney Michael T. Koenig of the Antitrust Division.  The Criminal Division’s Office of International Affairs and Deputy Chief Daniel Braun and Assistant Chief Brent Wible of the Criminal Division’s Fraud Section are thanked for their substantial assistance in this matter.

The Justice Department expresses its appreciation for the assistance provided by various enforcement agencies in the United States and abroad.  The Commodity Futures Trading Commission’s Division of Enforcement referred this matter to the department and, along with the U.K. Financial Conduct Authority, played a major role in the LIBOR investigation.  The Securities and Exchange Commission also played a significant role in the LIBOR series of investigations, and the department expresses its appreciation to the United Kingdom’s Serious Fraud Office for its assistance and ongoing cooperation.   The department has worked closely with the Dutch Public Prosecution Service and the Dutch Central Bank in the investigation of Rabobank.  Various agencies and enforcement authorities from other nations are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

November 20, 2015 in Financial Regulation | Permalink | Comments (0)

Thursday, November 19, 2015

OECD delivers international standard for collection of VAT on cross-border sales

Governments have taken an important step towards ensuring that consumption taxes on cross-border transactions are OECDeffectively paid in the jurisdiction where products are consumed, while minimising the risks that uncoordinated tax rules distort international trade.

The decision by representatives of more than 100 countries and jurisdictions to endorse the new OECD International VAT/GST Guidelines as the preferred international standard for coherent and efficient application of Value Added Tax/Goods and Services Tax to the international trade in services was one of the highlights of the annual meeting of the OECD Global Forum on VAT on 5-6 November, in Paris, France. See Statement of Outcomes.

This final package of OECD International VAT/GST Guidelines includes recommended rules for the collection of VAT on cross-border services, including Internet downloads, to private consumers (Business to Consumer, or B2C Guidelines). The Guidelines recommend that foreign sellers register and remit tax on sales of e-books, apps, music, videos and other digital goods in the jurisdiction where the final consumer is located. The Guidelines also include a recommended mechanism to ensure the effective collection of VAT by tax authorities from foreign sellers, thus helping governments to protect VAT revenues and levelling the playing field between domestic and foreign suppliers.

»Read more

BEPS implementation and beyond: Developed and developing countries gather at the OECD to tackle reforms to international tax system>
In-depth discussions took place this week as the international community continues to make progress on the international tax agenda. Officials from more than 100 countries drawing from tax authorities, ministries of finance, development agencies, as well as regional and internati

November 19, 2015 in OECD | Permalink | Comments (0)

Wednesday, November 18, 2015

Public Consultation on the Revision of the Interpretive Note to Recommendation 8 (Non-profit organisations)

he FATF welcomes views from the public, and in particular the non-profit sector, on work it is currently undertaking to rationalise the FATF Standard on non-profit organisations (NPOs) together with the results of the recently published Typologies Report and Best Practices Paper. The FATF is keen to involve the NPO sector in this process in order to ensure that practical knowledge and experience, in particular from service NPOs, can be properly reflected in the Interpretive Note to Recommendation 8.


November 18, 2015 in FinCEN | Permalink | Comments (0)

UK Beneficial Ownership Implementation Plan Released

The UK is fully committed to implementing the Financial Action Task Force (FATF) Recommendations, and in particular recognises the importance of transparency of beneficial S630_HMRC_sign__media_library__960_ownership information.  To deliver G20 Leaders’ St Petersburg commitment to lead by example in meeting the FATF standards regarding beneficial ownership, and their Brisbane commitment to implement the G20 High Level Principles on Beneficial Ownership Transparency, the UK:

1) Has published a national risk assessment of money laundering and terrorist financing in full consultation with the private sector and civil society, as well as with UK law enforcement agencies, supervisors and policy makers across Government.

2) Will ensure Company Law and UK Money Laundering Regulations clearly define the criteria for ownership and control that identify a natural person as the ‘beneficial owner’ of a company. This legislation will oblige companies to know who owns and controls them, by requiring that companies obtain and hold adequate, accurate and current information on their beneficial ownership. Companies will also be required to make this information accessible to domestic competent authorities.1

3) Will also require companies to report beneficial ownership information to a central register. This information will be adequate, accurate and current, and accessible to domestic competent authorities without alerting companies. Following a consultation, the UK has committed to make this register publicly accessible; the public register is expected to become operational in June 2016.

4) Will ensure trustees of express trusts obtain and hold adequate, accurate and current beneficial ownership information for their trusts, including the settlor(s), trustee(s) and beneficiaries. Mechanisms will be put in place to ensure that domestic competent authorities have access to this information.

5) Will hold in a central register the beneficial ownership information of trusts that generate tax consequences in the UK. Domestic competent authorities will be able to access this information.

6) Will ensure that financial institutions and designated non-financial businesses and professions (DNFBPs) undertaking customer due diligence are able to access information held on the central register of company beneficial ownership information. Trustees of express trusts will disclose their status, and provide beneficial ownership information of their trusts, when acting in their capacity as a trustee.

7) Will put in place effective mechanisms to share beneficial ownership information, in line with bilateral and multilateral agreements, and work to improve international cooperation–including the timely and effective exchange of information with foreign competent authorities.

8) Has committed to further action to improve company transparency, and following consultations has amended Company Law to:
 Prohibit UK companies from issuing bearer shares and require existing bearer shares to be surrendered and exchanged for registered shares, or cancelled and compensated.
 Prohibit use of corporate directors, with exceptions, and update how legal duties apply to shadow directors to align more closely with legal duties for individual directors.

9) Has committed to consult on extending beneficial ownership transparency to foreign companies investing in high value property or bidding on UK public contracts.

November 18, 2015 in Tax Compliance | Permalink | Comments (0)

Banque Internationale à Luxembourg and Zuger Kantonalbank (ZGKB) Turning Over Clients, Pay $13 million

BIL Switzerland is a Swiss private bank with offices in Zurich and Geneva.  BIL Switzerland is wholly owned by Banque Internationale à Luxembourg, a Luxembourg bank founded in Justice logo1856.  In 1996, BIL Switzerland’s ultimate parent underwent a merger to form the Dexia Group, headquartered in Belgium.  In connection with this merger, BIL Switzerland was renamed Dexia Privatbank (Schweiz) AG.  In 2011, the Dexia Group dissolved, and BIL Switzerland came under new ownership, at which time it reverted to the BIL Switzerland name.  BIL Switzerland provided private banking and asset management services principally through private bankers based in Zurich, Geneva and Lugano, Switzerland.

BIL Switzerland opened, maintained, serviced and profited from accounts that were held or beneficially owned by U.S. taxpayer clients.  BIL Switzerland opened several accounts for U.S. taxpayers who were leaving other Swiss banks that were being investigated by the department, including UBS and Credit Suisse.

BIL Switzerland offered a variety of traditional Swiss banking services – including hold mail and numbered accounts – that assisted and enabled certain of its U.S. taxpayer clients to conceal their assets and income, file false federal tax returns with the Internal Revenue Service (IRS) and evade their U.S. tax obligations.  BIL Switzerland also provided Swiss travel cash cards to U.S. clients, enabling them to access and spend funds from undeclared accounts in the United States.

In the period since Aug. 1, 2008, BIL Switzerland maintained at least 145 accounts, comprising an aggregate value of more than $64 million, that were owned by insurance companies and which held assets relating to insurance products that were issued to U.S. taxpayer clients of the respective insurance companies.  Such accounts, known commonly as insurance-wrappers, were titled in the names of insurance companies, but were funded with assets that were transferred to the accounts for the beneficial owners of the insurance products (the policy holders).  The assets in these accounts, while titled in the names of insurance companies, were managed by external asset managers for the ultimate benefit of the policy holders, through powers of investment that were given by the insurance companies to the external asset managers.

The assets of some insurance-wrapper accounts originated from undeclared accounts at BIL Switzerland.  These undeclared accounts were closed, and their assets were transferred to newly-opened accounts at BIL Switzerland in the name of an insurance company and managed by various external asset managers.  At account opening, the new accounts held the same assets that the U.S. taxpayer clients had previously held directly at BIL Switzerland.  One of the undeclared accounts did not hold U.S. securities, but the recipient insurance-wrapper account acquired U.S. securities at a later date.

In addition to the 145 insurance-wrapped accounts, BIL Switzerland also acted as a custodian to more than 30 U.S.-related accounts, comprising an aggregate value of approximately $83 million, that were maintained by external asset managers for U.S. taxpayers.

BIL Switzerland closed U.S.-related accounts in ways that concealed the U.S. beneficial owners of those accounts.  Upon request of the accountholders, BIL Switzerland removed the names of its U.S. taxpayer clients from joint accounts, leaving only non-U.S. persons as accountholders, or moved their assets into new BIL Switzerland accounts that were held in the names of non-U.S. persons, including non-U.S. relatives.  BIL Switzerland thereafter treated the recipient accounts as non-U.S.-related accounts, despite some relationship managers continuing to take and execute instructions given directly from the U.S. taxpayers formerly associated with the accounts, or the U.S. taxpayer clients retaining effective beneficial ownership over the transferred funds.

BIL Switzerland maintained three accounts, beneficially owned by two different U.S. taxpayers, that held U.S. securities in the names of three offshore entities.  The U.S. taxpayer’s interest in each of these accounts was not reported to the IRS even though BIL Switzerland knew or had reason to know that such offshore entity accounts were operated without strict adherence to corporate formalities.  Two of the offshore entities were organized in the British Virgin Islands, and the third was organized in the United Arab Emirates.  In effect, these offshore entities were used by the U.S. taxpayer beneficial owners as sham, conduit or nominee entities.  BIL Switzerland relationship managers associated with these accounts, while outside the United States:

  • Met with or took instructions from the U.S. taxpayer beneficial owners of these offshore entity accounts, instead of the directors or other authorized parties of the account;

  • Acted on instructions from an external asset manager, who received them directly from a U.S. taxpayer, without first knowing whether corporate formalities were observed;

  • Followed instructions that allowed a U.S. taxpayer to withdraw cash directly from the account, despite such withdrawals being contrary to the corporate purposes of the entity that owned the account; and

  • Executed transactions that allowed a U.S. taxpayer to make several significant wire transfers to unaffiliated Swiss banks for the U.S. taxpayer’s personal use or benefit, without first knowing or inquiring whether corporate formalities were satisfied.

BIL Switzerland accepted certifications from the directors of these entities that falsely declared that the entity was the beneficial owner of the assets deposited in the accounts.

From 2001 through February 2010, BIL Switzerland had a wholly-owned subsidiary, Experta AG, a Swiss company.  Experta AG provided a number of services, including accounting services, legal and tax advice, as well as the creation and management of entities such as offshore corporations, trusts and foundations.  During the time that Expert AG was affiliated with BIL Switzerland, Experta AG provided services that assisted and enabled certain U.S. taxpayers in the concealment of their assets and income and in the evasion of their U.S. tax obligations.

BIL Switzerland has fully cooperated with the department in relation to the Swiss Bank Program.  Among other things, BIL Switzerland required its relationship managers to submit declarations setting forth their knowledge concerning the U.S. taxpayer status of each account that they managed. BIL Switzerland also reviewed leaver lists from other banks to identify additional U.S.-related accounts.

Since Aug. 1, 2008, BIL Switzerland maintained 267 U.S.-related accounts having a maximum aggregate dollar value in excess of $182 million.  BIL Switzerland will pay a penalty of $9.71 million.

ZGKB was founded in 1892 and is headquartered in Zug, Switzerland.  Organized under the laws of the canton of Zug, all of ZGKB’s 14 branches are located within the canton.  The canton owns 51 percent of ZGKB and guarantees its deposits.

From at least 2001 to 2012, ZGKB opened and maintained accounts for certain of its U.S. clients while aware of the risk that such clients were not declaring income earned in these accounts or the existence of such accounts.  In doing so, ZGKB ignored red flags of wrongful intent on the part of U.S. clients who sought to open such accounts.  ZGKB offered a variety of traditional Swiss banking services – including hold mail and numbered accounts – that it knew could assist, and did assist, U.S. taxpayers in concealing their identity from the IRS by minimizing the paper trail associated with their undeclared assets and income.  ZGKB also accepted funds from a small number of UBS accountholders who had likely been forced to close their UBS accounts because of a U.S. tax-fraud investigation of UBS.

ZGKB assisted its U.S. clients in sending money to themselves, relatives, business partners, or other businesses in the United States by issuing checks drawn on a ZGKB account at a bank in New York.  In one case, the accountholder requested and received checks in excess of $90,000 on several occasions.  ZGKB cashed out the balances of U.S. residents’ accounts in substantial amounts.  In one instance, at the request of the U.S. client, ZGKB permitted the client to withdraw the entire account balance of approximately $665,000 in cash.  For several U.S. accountholders, ZGKB transferred funds from their accounts in multiple withdrawals – for example, 12 in one month – of amounts just under $10,000.  In at least one case, ZGKB was instructed to do so in order to evade a report to the IRS.

Since Aug. 1, 2008, ZGKB maintained and serviced 434 U.S.-related accounts having a maximum aggregate dollar value of $220 million.  ZGKB will pay a penalty of $3.798 million.

November 18, 2015 in FATCA | Permalink | Comments (0)

Are LSAT scores an early indicator of Bar passage success?

As fewer Californians pass the bar, are LSAT scores an early indicator of success? LA Times story here

2015 State of Legal Education Report states that extreme risk students fall in the bottom range of LSAT scores of 120 (lowest possible) to 144. Students who fall neath 150 are either high risk (147-149) or very high risk (145-146).

Business Insider coverage of study on the 74 law schools that admitted "extreme risk" students in 2015 and statistical analysis of extreme risk students' Bar passage.

See related article: Do Today's Accreditation Executive Orders Spell End for High Risk Law Schools?

See related blog post on Tax Prof - five schools improved, several first tier, improved but many schools taking lower LSATs declined, some double-digit: Bar Exam Carnage Continues: 10 Of 15 New York Law Schools Suffer Bar Pass Rate Declines

Is the Bar Exam a sufficient public protection tool from poorly qualified licensed professionals entering the market to solicit clients for money? 



November 18, 2015 in Education | Permalink | Comments (0)

Tuesday, November 17, 2015

The case for skipping the 401(k)-to-IRA rollover

Few options may seem to exist when determining what to do with the funds a client has accumulated in an employer-sponsored 401(k) upon changing employers — and the most likely course of action is to NU logoroll those funds into an IRA. While this strategy may be advisable in some cases, and can certainly serve to consolidate the client’s accounts to simplify management, there are important scenarios in which an IRA rollover is not the best move. In fact, in some instances. rolling 401(k) funds into an IRA can actually present serious tax and non-tax disadvantages. 

To make the right decision and maximize the value of the client’s retirement nest egg, it’s necessary to evaluate all pieces of the puzzle before jumping for an IRA rollover.

Read Byrnes & Bloink's analysis The case for skipping the 401(k)-to-IRA rollover

November 17, 2015 in Financial Services | Permalink | Comments (0)

OECD CRS Implementation by jurisdiction

This section will provide you with a jurisdiction-specific overview of the steps taken and choices made by jurisdictions in the context of implementing the Standard. The overview table OECDbelow will show the current state of implementation of all committed G20/OECD member countries in a single table. In case you would like to have more detailed information about the current state of implementation of the Standard in a particular jurisdiction, you will be able to access jurisdiction-specific legislation by clicking on the green tick relating to that jurisdiction. 

 A B C D E F G H I J K L M N P Q R S T U 


Committed to first exchange in 

Primary legislation  Secondary legislation  Guidance 

List of low risk non-reporting FIs and excluded accounts 

Domestic Reporting Format Wider Approach 
Argentina_small Argentina  2017
 Australia  2018


 Belgium  2017
 Brazil  2018
 Canada  2018
 Chile  2017
 China  2018
Jurisdiction  Committed to first exchange in  Primary legislation Secondary legislation Guidance  List of low risk non-reporting FIs and excluded accounts 

Domestic Reporting Format

Wider Approach 
Czech Republic_small Czech Republic  2017
 Denmark  2017
 Estonia  2017
 Finland  2017
France_small France  2017
Germany_small Germany  2017
Greece_small Greece  2017
 Hungary  2017
 Iceland  2017
 India  2017
Jurisdiction Committed to first exchange in  Primary legislation  Secondary legislation  Guidance  List of low risk non-reporting FIs and excluded accounts  Domestic Reporting Format Wider Approach 
 Indonesia  2018
 Ireland  2017
 Israel  2018
Italy_small Italy  2017
 Japan  2018
Korea, Republic_small Korea  2017
Luxembourg_small Luxembourg  2017
Mexico_small Mexico  2017
Netherlands_small Netherlands  2017
Jurisdiction Committed to first exchange in  Primary legislation

Secondary legislation

Guidance  List of low risk non-reporting FIs and excluded accounts

Domestic Reporting Format

Wider Approach 
New Zealand_small New Zealand  2018
Norway_small Norway  2017
Poland_small Poland  2017
Portugal_small Portugal  2017
Russian Federation_small Russian Federation  2018
Saudi Arabia_small Saudi Arabia  2018
Slovak Republic_small Slovak Republic  2017
Slovenia_small Slovenia  2017
South Africa_small South Africa  2017
Jurisdiction Committed to first exchange in  Primary legislation  Secondary legislation  Guidance  List of low risk non-reporting FIs and excluded accounts  Domestic Reporting Format Wider Approach
 Spain_small Spain  2017
 Sweden_small Sweden  2017
Switzerland_small Switzerland  2018
Turkey_small Turkey  2018
United Kingdom_small United Kingdom  2017


November 17, 2015 in GATCA, OECD | Permalink | Comments (0)