November 2018 JD Supra
jd supra logo

Banker will go to jail over FATCA was published by JD Supra on 11/2/18.

On September 11, 2018, the US Department of Justice (DOJ) reported that banker Adrian Baron, the former Chief Business Officer and former Chief Executive Officer of Loyal Bank Ltd, an off-shore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines, pleaded guilty of conspiring to defraud the United States by intentionally failing to comply with the Foreign Account Tax Compliance Act (FATCA). Baron was extradited to the United States from Hungary in July 2018 and faces up to five years in prison.  

The Banker

LOYAL BANK marketed itself on its website as an internet-based multicurrency private bank specializing in wealth management, private banking and investment banking for individuals and corporations. LOYAL BANK was registered with the IRS as a Foreign Financial Institution (FFI) under FATCA (GIIN 9V4NLM.00000.LE.670).  Loyal Bank is registered in Saint Vincent and the Grenadines which has an Inter-Governmental Agreement (IGA) Model 1B with the US Government to facilitate the automatic reporting of tax information to the IRS.

Adrian Baron opened accounts at Loyal Bank without requesting or collecting FATCA information.  Baron was caught during a US Government sting operation (utilizing an Undercover Agent as the Banker’s client) that emerged from the collapse of London brokerage Beaufort Management Services – subsequently shut down in March 2018 by UK Regulators.

Lessons for all Bankers

Bankers that “try to help” a US Taxpayer to avoid information reporting requirements under FATCA may have the law used against them as evidenced in the Adrian Baron conviction.  Bankers solicited by US persons for circumventing the IRS reporting requirements under FATCA could face criminal proceedings, financial penalties, incarceration and destruction of their reputation when investigated.  

US and International Regulators work together with Law Enforcement

IRS-Criminal Investigation, the FBI, the Securities Exchange Commission (SEC) together with the UK’s Financial Conduct Authority, the City of London Police and the Hungarian National Bureau of Investigation worked together and cooperated during the investigation.

Message is clear – Comply or else……….

All employees of FFI’s that operate under FATCA IGAs are expected to fully comply with FATCA.   Moreover, bankers that willfully don’t comply “can’t hide to avoid extradition to the US and face the US court system”.

Don’t be a Victim of your Own Making

The IRS remains committed to its priority effort to stop worldwide offshore tax evasion as it continues to pursue cases in all parts of the world.  This is not the first FATCA conviction. On May 2016, the DOJ brought criminal charges against a Canadian/US Citizen (Mulholland) who was sentenced to 12 years in prison.   FATCA can be and will be used against Bankers that assist US Persons in tax evasion. Bankers need to be ready to identify and report clients that want to be “FATCA exempt”.