The most public example of this phenomena of noose tightening on non-compliant offshore accounts is UBS. Yesterday, UBS announced a long awaited agreement with the U.S. Justice Department where they agreed to pay an extraordinary $780 Million and turn over the names of holders of undeclared accounts.  However UBS is just the crest of a tsunami of disclosure as every financial institution in the world is feeling the pressure LINK. Former gaps in the Qualified Intermediary Regime are also rapidly being closed and investigative powers are being beefed LINK  LINK up by Carl Levin and his colleagues in the U.S. Congress.

Carl Levin

Non-American account holders should also be nervous, as they may be the “dolphins in the tuna nets” whose accounts are first discovered by the U.S., Germany or the U.K. who then turn the information over to the relevant home jurisdiction. This international sharing of information is exactly what happened in the LGT case, where Germany was the first recipient of the stolen information.

As the authorities close in, wise account holders are taking advantage of the fact that their portfolios are currently depressed to engage in voluntary disclosures with tax authorities LINK. In many cases, given that only the last 5 or 6 years of income and capital gain need be brought up to date, the tax bill (with interest) is relatively palatable. Certainly more palatable then having the window of voluntary disclosure closed when the authorities get their names and will take nothing less than full tax, interest and civil and criminal penalties. In addition, once the account holder “comes clean”  they can then plan to properly and legally reduce or eliminate their future tax liability through expatriation or relocation.

However for those holders of non-compliant accounts who continue to hope that their accounts will somehow avoid pending discovery because of the traditional helpfulness of their personal account managers, I wish to point out the fact that Mr. Kieber was not an account manager. Rather he was someone in the IT department who had access to computer files. In today’s modern financial institution, one’s “secret account information” is available to a large number of employees. As Mr. Kieber discovered, stealing information and selling it to tax authorities is highly profitable (in the millions) for disgruntled former bank employees. Given layoffs in that industry, one doesn’t have to be a conspiracy theorist to believe that at least one or two of those boxes leaving in the arms of discharged employees contains more than family photos.   

David S. Lesperance, Barrister and Solicitor