Justice Department and IRS Continue to Crackdown on Switzerland, Expand Investigation into Belize

The U.S. Justice Department recently projected that it would collect more than $1.36 billion from 80 Swiss banks and other Swiss financial firms that encouraged U.S. taxpayers to hide money abroad.  This amount is from the Swiss Bank Program which allowed companies, made up of mostly small and midsize firms, to report their misdeeds and pay penalties to avoid U.S. prosecution.

The U.S. Justice Department has slowly started to spread its scope of investigation beyond Switzerland and is now investigating banks and financial advisers in Israel, the Caribbean, the Cayman Islands and especially Belize for their involvement in evasion of U.S. taxes.

In the middle of 2015, a federal judge had issued an ordered which allowed the IRS to serve a John Doe summons to discover Americans who had offshore accounts in Belize.  John Doe summons are used by the IRS to obtain information about possible violations of the internal revenue law by individuals whose identities are unknown.  They serve the dual purpose of uncovering information to continue to prosecute foreign financial institutions and U.S. taxpayers for hiding taxable assets and to encourage recalcitrant taxpayers to come forward and report their previously undisclosed assets.

The targets of the investigation in Belize are Belize Bank International Limited and Belize Bank Limited.  The John Doe summons, however, are aimed at Bank of America, N.A. and Citibank, N.A., as these are the correspondent banks used by those institutions in Belize and the IRS believes are institutions which helped facilitate tax evasion.  The IRS and U.S. Justice Department have been particularly effective at identifying banks and foreign financial institutions that may be facilitating tax evasion thanks to the Offshore Voluntary Disclosure Program, whereby taxpayers with previously undisclosed assets have to file amended returns, including information returns where they report exactly what accounts and the amounts of money which were previously undisclosed for the past years.