Privatbank Von Graffenried AG (effective 7/2/15), Banque Pasche SA (effective 7/9/15), and ARVEST Privatbank AG (effective 7/9/15) have been added to the IRS OVDP FAQ 7.2 Foreign Financial Institutions or Facilitators list.
We've talked about what it means when your bank has been added to this list many times before — essentially you have no choice but to enter into one of the Offshore Voluntary Disclosure Programs. If you are non-willful, you can use one of the Streamlined Procedures. If you are looking for protection against criminal prosecution, you can enter into the OVDP and pay the 50% offshore penalty. Or, if you feel that is inappropriate or unnecessary, you can maintain criminal protections and opt-out of the standard OVDP in order to argue for lower penalties.
And with the news of Rand Paul's FATCA/FBAR lawsuit against the US Treasury, the IRS and FinCEN, the legal foundation the IRS relies upon to impose these drastic penalties, may not be as strong as the IRS hopes.
So while we believe it is imperative to avoid any criminal prosecution and enter into the appropriate disclosure program, the belief that you must pay 50% of your account balance may have stronger grounds to be challenged than ever before, especially if Sen. Paul's injunction is even considered in the slightest.
The Privatbank Von Graffenried AG Deferred Prosecution Agreement
Some items of note: Privatbank Von Graffenried AG only had a penalty of $287,000 to pay to the US (Hat tip to Attorney Scott Frewing at Baker & McKenzie on that). Also, there appeared to be one particularly wealthy and powerful US/Swiss national who banked at Von Graffenried and was able to avoid any notoriety and criminal prosecution by — as we assume — getting into an OVDP (or OVDI) in time. Note the following from paragraph 13 of the Von Graffenried Non-Prosecution Agreement:
The bulk of what was held by US persons was $459 million, with the majority — $426 million spread over five accounts — being held by one dual Swiss-US citizen. The remaining $33 million was spread over 53 individual accounts held by US persons. So, while at face value it seemed like perhaps each of the related accounts may have had $10 million on average, the balances were heavily skewed due to one wild outlier.