Opening the Offshore Bank Can of Worms

An IRS program designed to get people with offshore accounts to "fess up" could open up the whole secretive world of offshore accounts to IRS pressure.

The program is designed to get people with accounts at Swiss bank UBS to avoid criminal action by coming forward with their account information by September 23. But tax attorneys tell Bloomberg it’s not just the UBS customers coming forward.

People with accounts at Credit Suisse Group AG, Julius Baer Holding AG, LGT Group in Lichtenstein, HSBC Holding Plc, and Bank Leumi Le-Israel have also come forward.

“It is very possible that the IRS will be able to get strangleholds over the other banks because they’ll have specific information which will permit them to bring specific allegations of wrongdoing before the U.S. courts,” Robert Fink, an attorney at Kostelanetz & Fink in New York, told Bloomberg. “This thing may spread like wildfire.”

Of course, that was the idea behind the U.S. settlement of a long-running legal battle with UBS. The Swiss Bank agreed in that deal to give up 4,450 names of Americans with secret UBS accounts. Experts said at the time that the possibility of being one of those 4,450 would flush out many more secret account holders.

And bring out those account holders it has, and not just from UBS. Bloomberg reports that tax attorneys say their clients are revealing accounts at banks in Germany, England, Italy, Belgium, Singapore, Hong Kong, the Bahamas, Granada, the Cayman Islands, and Israel.

Tax attorneys say their phones are ringing off the hooks.

All of that should make the IRS very happy. Senator Carl Levin estimates that the U.S. loses $100 million a year in taxes to offshore-account evasion.