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FATCA: First criminal conviction for failure to comply

We knew it was coming, but this month we now have the first-ever conviction for failing to comply with FATCA.  The US government with help from other countries in what reads like an international James Bond type movie thriller, complete with undercover agents in a sting operation, has shown that they will aggressively pursue those who fail to comply with the law.

FATCAAdrian 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 to conspiring to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (FATCA).  When sentenced, Baron faces a maximum of five years in prison.

The guilty plea followed a sting operation in which an undercover agent sought and received the cooperation of Baron in hiding the US persons interest in various offshore accounts.

The guilty plea was announced by the  Justice Department’s Tax Division; the FBI, the Internal Revenue Service Criminal Investigation. The U.S. Securities and Exchange Commission (SEC), the City of London Police; the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation provided significant cooperation and assistance during the investigation.

The DOJ announced earlier that it intended to direct its focus to Asia.  Following its efforts in Switzerland, the DOJ gained vital information of where the funds that had been “hiding” in Switzerland had gone.  And this information clearly indicated Hong Kong and Singapore as the destination of these “hidden” funds in the old adage of “follow the money”.

The Baron conviction is proof that the US tax authorities are taking the duty to find and prosecute individuals who have committed tax fraud or money laundering offenses, as well as those who have helped the individuals in these efforts very seriously.   However the assistance the US tax authorities received from various European authorities clearly demonstrates these efforts are not just focus of the US authorities but is becoming a global effort.

There is nowhere to hide.

Here is the link from the DOJ or full text below: https://www.justice.gov/usao-edny/pr/former-executive-loyal-bank-ltd-pleads-guilty-conspiring-defraud-united-states-failing

FOR IMMEDIATE RELEASE

Tuesday, September 11, 2018

Former Executive of Loyal Bank Ltd Pleads Guilty to Conspiring to Defraud the United States by Failing to Comply with Foreign Account Tax Compliance Act (FATCA)

First Ever Conviction for Failing to Comply with Foreign Account Tax Compliance Act (FATCA)

Earlier today in federal court in Brooklyn, 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 to conspiring to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (FATCA).  Baron was extradited to the United States from Hungary in July 2018.  The guilty plea was entered before United States District Judge Kiyo A. Matsumoto.

Richard P. Donoghue, United States Attorney for the Eastern District of New York; Richard E. Zuckerman, Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and James D. Robnett, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the guilty plea.  Mr. Donoghue thanked the U.S. Securities and Exchange Commission (SEC), both the New York Regional Office and the Washington, D.C. Office; the City of London Police; the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation for their significant cooperation and assistance during the investigation.

FATCA is a federal law enacted in 2010 that requires foreign financial institutions to identify their U.S. customers and report information (FATCA Information) about financial accounts held by U.S. taxpayers either directly or through a foreign entity.  FATCA’s primary aim is to prevent U.S. taxpayers from using foreign accounts to facilitate the commission of federal tax offenses.

According to court documents, in June 2017, an undercover agent met with Baron and explained that he was a U.S. citizen involved in stock manipulation schemes and was interested in opening multiple corporate bank accounts at Loyal Bank.  The undercover agent informed Baron that he did not want to appear on any of the account opening documents for his bank accounts at Loyal Bank, even though he would be the true owner of the accounts.  Baron responded that Loyal Bank could open such accounts and provide debit cards linked to them.

In July 2017, the undercover agent again met with Baron and described how his stock manipulation scheme operated, including the need to circumvent the IRS’s reporting requirements under FATCA.  During the meeting, Baron stated that Loyal Bank would not submit a FATCA declaration to regulators unless the paperwork indicated “obvious” U.S. involvement.  Subsequently, in July and August 2017, Loyal Bank opened multiple bank accounts for the undercover agent.  At no time did Baron or Loyal Bank request or collect FATCA Information from the undercover agent.

Baron’s guilty plea represents the first-ever conviction for failing to comply with FATCA.  When sentenced, Baron faces a maximum of five years in prison.

Baron is the second defendant to plead guilty in this case.  On July 26, 2018, Arvinsingh Canaye, formerly the General Manager of Beaufort Management Services Ltd. in Mauritius, pleaded guilty to conspiracy to commit money laundering.

The case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Jacquelyn M. Kasulis, Michael T. Keilty and David Gopstein are in charge of the prosecution.  The Criminal Division’s Office of International Affairs provided significant assistance in this matter.

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