IRS Updates Blacklist of Foreign Financial Institutions or Facilitators

Under the IRS 2014 Offshore Voluntary Disclosure program, the 27.5% miscellaneous offshore penalty is increased in certain cases to 50%:

FAQ 7.2 states: "Beginning on August 4, 2014, any taxpayer who has an undisclosed foreign financial account will be subject to a 50% miscellaneous offshore penalty if, at the time of submitting the pre clearance letter to IRS Criminal Investigation: an event has already occurred that constitutes a public disclosure that either:

(a) the foreign financial institution where the account is held, or another facilitator who assisted in establishing or maintaining the taxpayer’s offshore arrangement, is or has been under investigation by the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person;

(b) the foreign financial institution or other facilitator is cooperating with the IRS or the Department of Justice in connection with accounts that are beneficially owned by a U.S. person; or

(c) the foreign financial institution or other facilitator has been identified in a court-approved issuance of a summons seeking information about U.S. taxpayers who may hold financial accounts (a “John Doe summons”) at the foreign financial institution or have accounts established or maintained by the facilitator.  

Examples of a public disclosure include, without limitation: a public filing in a judicial proceeding by any party or judicial officer; or public disclosure by the Department of Justice regarding a Deferred Prosecution Agreement or Non-Prosecution Agreement with a financial institution or other facilitator”

The IRS provides a list of foreign financial institutions or facilitators meeting this criteria, i.e., once a foreign financial institution appears on this list, the miscellaneous offshore penalty will be increased from 27.5% to 50%. Once the 50% miscellaneous offshore penalty applies to any of the taxpayer’s accounts or assets, the 50% miscellaneous offshore penalty will apply to all of the taxpayer’s assets subject to the penalty, including accounts held at another institution or established through another facilitator for which there have been no events constituting public disclosures of (a) or (b) above.

On December 30, 2014 two institutions were added to the list. The new list is as follows (with the additions underlined and in bold-face):



Foreign Financial Institutions or Facilitators

1. UBS AG
2. Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.
3. Wegelin & Co.
4. Liechtensteinische Landesbank AG
5. Zurcher Kantonalbank
6. Swisspartners Investment Network AG, swisspartners Wealth Management AG, swisspartners Insurance Company SPC Ltd., and swisspartners Versicherung AG
7. CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates
8. Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.
9. The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India)
10. The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield), its predecessors, subsidiaries, and affiliates
11. Sovereign Management & Legal, Ltd., its predecessors, subsidiaries, and affiliates
12. Bank Leumi le-Israel B.M., The Bank Leumi le-Israel Trust Company Ltd, Bank Leumi (Luxembourg) S.A., Leumi Private Bank S.A., and Bank Leumi USA