Tuesday, January 18, 2011

WikiLeaks: Release of 2,000 Foreign Bank Accounts Puts Account Holders at Risk of Criminal Prosecution

Source: Caplin & Drysdale

The WikiLeaks announcement that it plans to release information on more than 2,000 international bank accounts threatens to provide the IRS and other tax authorities with the names of persons with undeclared foreign accounts, putting those persons at risk of criminal prosecution. The data was provided by Rudolf Elmer, a former chief operating officer who managed the Caribbean operations of Julius Baer. Elmer's disclosure of this data to WikiLeaks has extensive ramifications for undeclared account holders whose names will soon become public.

"Public display of this data will definitely give tax authorities fodder to open new investigations," said Scott D. Michel, President of Caplin & Drysdale. "If WikiLeaks releases the name of an account holder before he or she has initiated a voluntary disclosure, the protections afforded by the IRS voluntary disclosure policy do not apply, and criminal prosecution is a serious risk."

"Since it is difficult for the IRS to find people who have failed to disclose foreign accounts, it will not ignore the names of such individuals when they are provided on a silver platter," he said, "irrespective of whether the data was stolen by a disgruntled banker or released by WikiLeaks."

Michel added that account holders can avoid catastrophe by starting the voluntary disclosure process before their names enter the public domain.

"The initial phase of the voluntary disclosure process is quite straightforward," said Michel. "It can happen very quickly and the account holder can then inoculate himself or herself against criminal prosecution."