Norris McLaughlin & Marcus, P.A.

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U.S. Court Requires Disclosure of Foreign Bank Account Records

Posted on March 30th, 2012 | Author: Norris McLaughlin & Marcus

The U.S. Court of Appeals for the Ninth Circuit recently considered whether a U.S. grand jury could have access to records relating to a taxpayer’s foreign bank accounts in order to determine whether the target of the grand jury proceeding used secret Swiss bank accounts to evade paying U.S. taxes (In re: Grand Jury Investigation of M.H., M.H. v. United States).  The records in question were the same records that a taxpayer would need to have available in order to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, more generally known as the “FBAR” form.

The target (“M.H.”) argued that providing the records would violate his Fifth Amendment right against self-incrimination.  M.H. was one of approximately 250 U.S. taxpayers whose account information was turned over to the U.S. Department of Justice pursuant to the 2009 deferred-prosecution agreement entered into with UBS AG.  The Ninth Circuit carefully considered the Fifth Amendment argument, but held that M.H. was required to turn over his foreign bank account records to the grand jury under the “Required Records Doctrine.”

This case is very significant since it allowed a grand jury to review FBAR records, which would be very relevant as the Department of Justice develops a tax fraud case.

Taxpayers with offshore bank accounts need to discuss with their tax advisors the compliance issues, including filing FBARs and considering participation in the IRS Offshore Voluntary Disclosure Program, which was recently reopened.

Melinda Fellner Bramwit contributed to this post.