Department of Justice Prosecutes US Taxpayer For Failing to Report HSBC Bank Account in Bermuda

May 23, 2011   

On May 19, 2011, a criminal information was filed in the U.S. District Court for the District of Massachusetts charging Michael F. Schiavo with one count of willfully violating the Foreign Bank Account Reporting Requirements of 31 U.S.C. sections 5314 and 5322(a).

Of particular interest is the following paragraphs of the information:

11. A “silent disclosure” occurs when a U.S. taxpayer with an undeclared account files FBARs and amended returns and pays any related tax and interest for previously unreported offshore income without notifying the IRS of the undeclared account through the Voluntary Disclosure Program. A silent disclosure does not constitute a voluntary disclosure. On its website, the IRS strongly encourages taxpayers to come forward under the Voluntary Disclosure Program and warns them that taxpayers who instead make silent disclosures risk being criminally prosecuted for all applicable years.

18. On or about October 6, 2009, following widespread media coverage of UBS’s disclosure to the IRS of account records for undeclared accounts held by U.S. taxpayers and the IRS’s Voluntary Disclosure Program, Schiavo made a “silent disclosure” by preparing and filing FBARs and amended Forms 1040 for tax years 2003 to 2008, in which he reported the existence of his previously undeclared account at HSBC Bank Bermuda. He made such filings notwithstanding the availability of the Voluntary Disclosure Program. Schaivo reported on the amended individual income tax returns the interest income that he earned from the previously undeclared account he held at HSBC Bank Bermuda but did not report on the 2006 return the income earned that he earned from Headway Partners.

19. On or about October 27, 2009, a Special Agent from the IRS attempted to interview Schiavo at his home.

20. On or about October 29,2009, Schiavo prepared and executed a second amended individual income tax return for tax year 2006 on which he reported the income earned that he earned from Headway Partners and that had been deposited into his previously undeclared account at HSBC Bank Bermuda.

A full copy of the information is available here.

What is interesting is that the criminal charges do not contain any violations of the Internal Revenue Code (Title 26), but instead only contain violations of the Bank Secrecy Act. The Bank Secrecy Act requires individuals to file Form TD 90.22-1. A copy of the form is available here.

Further, the U.S. Department of Justice has issued a press release on the matter available here.

The attorneys at Fuerst Ittleman, PL have extensive experience in addressing undeclared foreign bank accounts, undeclared income and voluntary disclosures. You can contact an attorney by emailing us at contact@fidjlaw.com.