SOURCE: Post & Schell PC

Post & Schell PC

January 05, 2011 10:24 ET

White Collar Crime/Tax Trends to Watch in New Year

Tax Enforcement Upsurge to Continue in 2011; Offshore Assets Will Again Be Focus, Says Authority on White Collar Crime at Post & Schell PC

PHILADELPHIA, PA--(Marketwire - January 5, 2011) - The U.S. government's intensive tax and money laundering enforcement drive will continue in 2011, with authorities still sharply focused on offshore assets.

The IRS will implement its new "Global High Wealth Industry Group," dedicated to auditing not just the tax returns but the entire financial arrangements of wealthy individuals, with a focus on offshore accounts. This development is likely to lead to more audits, and much more probing audits; it is one of several developments that together signal that the coming year will bring a new wave of tax enforcement actions, says an authority on white collar crime. 

"Tax authorities have been on a sustained drive to maximize revenue and curb alleged abuses by high net worth individuals," says Peter D. Hardy, Esq., a former U.S. prosecutor and now a principal in the white collar defense, compliance and risk management practice group of law firm Post & Schell PC. Mr. Hardy is the author of Criminal Tax, Money Laundering and Bank Secrecy Act Litigation, a comprehensive reference work published in November 2010 by BNA Books.

"That trend will continue and even intensify in the coming year," Mr. Hardy says. "The focus will be on offshore assets and will expand to encompass even more elements of overall taxpayer financial conduct. Investors, institutions and their advisors need to prepare now to anticipate and address risks and resolve them, if at all possible."

According to Mr. Hardy, among the major trends and developments to watch in 2011 are:

Criminal Tax

  • Prosecutions of Individuals Will Ramp Up: Criminal enforcement efforts will continue. Tax authorities have sustained the level of prosecutions of individual taxpayers holding undisclosed offshore accounts, and the professionals who have assisted them. "The December 2010 prosecution of Renzo Gadola, formerly employed as a private banker by Swiss bank UBS AG, indicates that there will be no slackening in the intensity of prosecutions," Mr. Hardy says.

  • IRS Is Likely to Announce New Offshore Voluntary Disclosure Program: There is anticipation that the IRS will announce new guidelines for voluntary disclosure of offshore accounts. These are likely to be similar to -- but more aggressive than -- the former special version of the disclosure program that closed in October 2009.

  • Reporting Requirements for Foreign Assets to Get Stricter: A new reporting regime for foreign financial institutions, created under the HIRE/FACTA legislation enacted in March 2010, will have a major impact on both businesses and individuals -- and will continue to undercut "reliable" foreign bank secrecy by requiring the institutions, not just individuals, to report offshore assets. "Very broadly, the new requirements will oblige foreign financial institutions (FFIs) to obtain identification from U.S. account holders and report it to the IRS, or be subject to a 30 percent withholding tax on certain U.S. income and asset sales," Mr. Hardy explains. "Although the requirements do not take effect until 2013, FFIs must start to consider now what processes will be put into place. Banks will be increasingly wary of cross-border transfers and of offshore account holders. FFIs will have to assess the cost of doing business in the U.S. and having U.S. customers."

Bank Secrecy Act

  • Enforcement Net to Tighten on Cross-Border Transfers: New regulations for reporting cross-border transactions under the Bank Secrecy Act are likely to take effect in 2011. The proposed regulations would require certain domestic banks and money transmitters to report cross-border electronic transmittal of funds, and would also require banks to file an annual report with FinCEN that lists the accounts and taxpayer identification numbers of all account holders who sent or received these transmittals. "As with HIRE/FACTA, the proposed regulations would undercut efforts to conceal the transfer of funds between offshore accounts and the U.S. -- the enforcement net will be drawn even tighter," Mr. Hardy says. 

  • FBAR Filings to Increase: The number of FBAR filings will continue to rise significantly. The FBAR reporting requirement will now be supplemented by the similar and new requirement under HIRE/FACTA that taxpayers holding over $50,000 in foreign financial assets during a tax year will have to file a disclosure statement with their income tax return regarding the assets, with many taxpayers required to file both sets of forms.

Money Laundering

  • Anti-Money Laundering Programs to Intensify -- and Their Scope Expands to Cover New Enforcement "Hot Spots": Anti-money laundering compliance programs pursued by financial institutions under the Bank Secrecy Act will continue to have to account for offshore activities. Among the requirements is strict adherence to the traditional requirement to file any necessary Suspicious Activity Reports. 

"Tax and money laundering enforcement shows no sign of slowing, and is likely to expand into new areas of complexity. Those at risk would be well advised to anticipate scrutiny and take necessary steps toward resolution sooner rather than later," said Mr. Hardy.

For more information or to schedule an interview, please contact Itay Engelman of Sommerfield Communications, Inc. at 212-255-8386 or Itay@sommerfield.com.

About Peter D. Hardy, Esq.
Peter D. Hardy, a former federal prosecutor, is a principal in Post & Schell's national White Collar Defense, Compliance & Risk Management Practice Group. His practice focuses on the counseling and defense of corporations, directors, officers, managers, professionals and others, across a broad spectrum of industries, who may face allegations of business-related or other misconduct.

Mr. Hardy has significant experience in complex criminal matters at the investigative, trial, and appellate levels. Before coming to Post & Schell, Mr. Hardy served for six years as an Assistant United States Attorney for the U.S. Attorney's Office in Philadelphia, and for five years as a Trial Attorney for the Department of Justice, in the Criminal Enforcement Section of the Tax Division in Washington, D.C. Prior to joining the Department of Justice, Mr. Hardy served as a judicial law clerk for U.S. District Judge George E. Woods, and for U.S. Court of Appeals Judge Cornelia G. Kennedy, in Detroit, Michigan.

Mr. Hardy has particular expertise in allegations of tax fraud, voluntary disclosures to the IRS, financial institution crime, money laundering, health care fraud, mortgage fraud, bankruptcy fraud, identity theft, environmental crime, and public corruption. 

Mr. Hardy is the author of Criminal Tax, Money Laundering and Bank Secrecy Act Litigation, published in November 2010 by BNA Books, a major legal publishing house.

About Post & Schell PC
Post & Schell provides litigation, corporate, transactional, regulatory, compliance, consulting and educational services locally, regionally and nationally to a broad spectrum of proprietary and not-for-profit industries. The firm concentrates on providing these niche services in sophisticated and complex matters.

Post & Schell lawyers work extensively in industries including banking and financial services, professional services, energy, manufacturing, retail, and healthcare and pharmaceuticals. The firm routinely handles the most complex and sensitive issues in these industries. Areas of specialization include white collar defense, internal investigations, compliance, commercial litigation, intellectual property protection and appellate law. 

Established in 1968, Post & Schell currently has approximately 165 lawyers in 7 offices: Washington, D.C.; Philadelphia, Pittsburgh, Harrisburg, Allentown, and Lancaster, PA; and Princeton, NJ.

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