When a Los Angeles man purposefully failed to file a Report of Foreign Bank and Financial Accounts (FBAR), the Internal Revenue Service took notice.
Filing an FBAR is required for persons in the United States who own assets, have signature authority, or have a financial interest over a certain threshold amount in financial tools held in foreign institutions. The filing identifies offshore tax accounts held by US citizens and gives the IRS better oversight of foreign-held assets in foreign tax shelters. Generally, the threshold for filing is $10,000 of value accrued at any time during a calendar year.
While some individuals mistakenly fail to file their FBAR, there are those who willfully avoid filing in order to hide assets and profits held offshore. We recently discussed the guilty verdict earned by businessman Paul Manafort for failure to file his FBAR. In Los Angeles, businessman Ben Birman recently pled guilty to failure to file an FBAR although he had more than $1 million in deposits at Bank Leumi, an Israeli banking interest.
In this case, there were (at least) two problems—the deceptive campaign of Mr. Birman and the willful involvement of the foreign banking interest, Bank Leumi. The activities of Mr. Birman are the tip of the iceberg of problems for Bank Leumi who entered into a deferred prosecution agreement as part of the IRS criminal tax investigation.
As it turns out, Mr. Birman was one of more than 1,500 account holders in the U.S. whose assets Bank Leumi conspired to protect from the IRS. In their agreement, Bank Leumi, itself held by one of the largest banks in Israel, worked diligently to help its clients conceal their assets around the world through actions that included:
- Banking officers who met secretly with account holders around the world in parks, hotels, and coffee shops to discuss financial matters with their clients
- The use of shell entities located in various secrecy jurisdictions including Belize to hide undeclared assets
- The management of the undeclared assets of U.S. clients in offshore bank accounts under anonymous and assumed names
- Offering surreptitious mail services to avoid mail delivery to U.S. account holders to avoid detection
- Creating and making loans for U.S. clients to allow them to leverage undeclared value held in secret accounts
- Bank Leumi signed up taxpayers who fled Swiss banks as the IRS closed in on those accounts
For its part in this and other tax fraud, Bank Leumi admitted guilt and will pay the United States $270 million which constitutes reimbursement of lost tax and a $157 million tax penalty for its willful and fraudulent actions.
And Mr. Birman? He faces five years in prison, probation, restitution, and penalties when he is sentenced in December of this year.
Experienced legal representation on criminal tax matters
From offices in Cleveland and Chicago, the knowledgeable tax lawyers at Robert J. Fedor, Esq., LLC help you handle IRS tax challenges and other tax controversy. When you need confidential, responsive, legal advice locally or abroad, call 800-579-0997 or contact us.
