From the Tax Law Offices of David W. Klasing - If You Have a Secret Account with Bank of Butterfield, You May Be Under Criminal Tax Investigation by the IRS Criminal Division

Rhea-AI Summary

The Bank of N.T. Butterfield & Son Limited (NYSE: NTB) has entered a non-prosecution agreement (NPA) with the U.S. government to avoid prosecution over tax evasion allegations. This agreement requires the bank to cooperate with IRS investigations and hand over 386 client files of U.S. taxpayers who may have violated tax laws. Butterfield will pay $5.6 million, primarily covering fees for its services that enabled tax evasion. U.S. client accounts at Butterfield hold approximately $433 million in assets. The agreement's three-year term mandates ongoing compliance, with potential consequences for non-cooperation.

Positive

• Entered a non-prosecution agreement with the U.S. government, avoiding prosecution.
• Agreed to cooperate fully with IRS investigations, which can help restore trust.
• Paid $5.6 million to settle allegations, reducing potential future liabilities.

Negative

• Faced significant scrutiny from U.S. authorities for enabling client tax evasion.
• The agreement exposes Butterfield to continuing investigations and potential audits.
• Reputational damage amid allegations of assisting tax evasion could lead to client loss.

IRVINE, Calif., April 18, 2023 /PRNewswire/ -- We tend to think about offshore banks, pension and financial accounts and income generating assets as outside of the reach of the federal government. However, this is far from the case. We can see this in the example of the Bank of Butterfield, which just recently entered a non-prosecution agreement (NPA) with the United States government.

The NPA forces Butterfield to hand over funds associated with their part in connection to enabling their clients' tax evasion schemes. But it also creates a mandate that Butterfield cooperate fully with additional IRS civil and criminal tax investigations over the next three years, starting with the discovery of roughly 386 client files on U.S. taxpayer-clients who may have intentionally or accidently fallen astray of the tax code. The NPA also prevents Butterfield from contesting a U.S. government civil forfeiture action.

The IRS has made no secret that it intends to ramp up its prosecution of U.S. tax offenders that utilize undisclosed foreign accounts and evade taxes on offshore businesses and investments, especially those who attempt to hide funds overseas. If you had or currently have an account with the Bank of Butterfield, or currently have an account with a similar institution that may come under government scrutiny, we can help. Call the dual licensed International Tax Attorneys and CPAs at the Tax Law Offices of David W. Klasing for an evaluation of your options. We can be reached at (800) 681-1295 or schedule online here.

NOTE: As long as a taxpayer that has willfully committed tax crimes (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the tax fraud (including a pattern of non-filed returns) through a domestic or offshore voluntary disclosure before the IRS has started an audit or criminal tax investigation / prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply. 

It is imperative that you hire an experienced and reputable criminal tax defense attorney to take you through the voluntary disclosure process. Only an Attorney has the Attorney Client Privilege and Work Product Privileges that will prevent the very professional that you hire from being potentially being forced to become a witness against you, especially where they prepared the returns that need to be amended, in a subsequent criminal tax audit, investigation or prosecution.

Moreover, only an Attorney can enter you into a voluntary disclosure without engaging in the unauthorized practice of law (a crime in itself). Only an Attorney trained in Criminal Tax Defense fully understands the risks and rewards involved in voluntary disclosures and how to protect you if you do not qualify for a voluntary disclosure.

As uniquely qualified and extensively experienced Criminal Tax Defense Tax Attorneys, Kovel CPAs and EAs, our firm provides a one stop shop to efficiently achieve the optimal and predictable results that simultaneously protect your liberty and your net worth  See our Testimonials to see what our clients have to say about us!

USAO SDNY, Bank of Butterfield Enter Agreement to Resolve Investigation

Earlier this month, Audrey Strauss, the U.S. Attorney for the Southern District of New York, with several colleagues, announced via press release that the U.S. Attorney's Office entered into a non-prosecution agreement ("NPA") with the Bank of N.T. Butterfield & Son Limited.

Butterfield, a publicly traded entity (NYSE: NTB) based in Bermuda, has been facing a Department of Justice inquiry stemming from legacy business with U.S. clients that was first reported in November of 2013. U.S. taxpayer-clients account for a large slice of Butterfield's pie – according to the text of the NPA, accounts open at Butterfield's Bermuda and Cayman Islands operations that were held by U.S. taxpayer-clients accounted for roughly $433 million in assets under management.

Butterfield avoids prosecution for their alleged role in assisting U.S. taxpayer-clients in their effort to open and maintain undeclared foreign bank accounts from 2001 through 2013. The NPA runs for a term of three years, so if Butterfield breaks with their cooperation during that period of time, they open themselves up again to prosecution.

As part of the NPA, Butterfield agreed to pay $5.6 million to the U.S. government.  Roughly $4.9 millions of that total represents the fees that Butterfield charged for their illicit services.  The remaining $700,000 will be paid directly to the IRS in restitution for the estimated amount of unpaid taxes due to the tax evasion.

Additionally, and perhaps most critically, Butterfield also agreed as part of their "extraordinary cooperation" (according to the press release) to provide the IRS's Criminal Division with approximately 386 client files for those U.S. taxpayer clients that were allegedly noncompliant with United States tax code.

Impact of Butterfield NPA on U.S. Taxpayers

Strauss, head of what many consider to be the most capable arm of the United States Justice Department, suggested that this NPA is just one of many future bullet points on the U.S. roadmap of targeting evasion enablers like Butterfield.  According to Strauss, "We will continue to pursue financial services firms around the world that help their clients evade U.S. taxes."

James C. Lee, Chief of the IRS Criminal Investigations Division (IRS-CI), sent a message to would-be foreign account-holding tax evaders: "Anyone who is hiding money or assets offshore with the intent of committing tax evasion will be found and prosecuted. It's not a matter of 'if,' it's a matter of 'when.'"

The IRS and the rest of the federal government are determined to make this latest development into a merely a footnote as part of a much larger operation to track down and eliminate offshore tax evasion schemes. If you are worried about future government actions that may compromise your assets, speak to one of our dual licensed tax attorneys and CPAs today.

If You Have a Butterfield Account, You May Face an IRS Investigation

The press release announcing the Butterfield NPA specifically says the following: "The NPA ... recognizes Butterfield's cooperation, including its efforts to facilitate the production of approximately 386 client files for non-compliant U.S. taxpayers, which included the identities of those U.S. taxpayers."

The government can use any of the information gleaned from the NPA to mount audits and investigations of any U.S. taxpayer identified Butterfield's information dump.

But the information breach is not done yet. As noted above, the term of the cooperation required by the NPA is three years from the date of the agreement.  If the federal government comes knocking at Butterfield's door any time over those three years, the bank is obligated to cooperate with the government's requests or else open themselves up again for prosecution, a fate they expressly hoped to avoid by agreeing to the NPA.

This cooperation also encompasses compliance with civil forfeiture actions. Civil forfeiture is the U.S. government's ability to seize any assets that they have reason to believe may have been used in furtherance of a crime. This would include financial assets (like foreign bank accounts) that may have been used to subvert tax liability.

The explicit wording contained in the press release reads as follows: "In connection with this forfeiture, Butterfield has agreed not to contest a civil forfeiture action filed by the United States." Without the assistance of the bank, any client funds that are held by Butterfield are subject to the prying eyes (and reaching arms) of the federal government.

Call Us Today to Shore Up Your Defenses Against IRS Investigations

When the IRS gets its hands on a possible tax evasion scheme, they rarely let up. Taking the steps now to prevent such a situation can be as easy as calling the Tax Law Offices of David W. Klasing. We can be reached at (800) 681-1295.

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Questions and Answers About Foreign Tax Audits

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Questions and Answers about Offshore Voluntary Disclosure Initiative (OVDI)

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We Are Here for You

Regardless of your business or estate needs, the professionals at the Tax Law Offices of David W. Klasing are here for you. We are open for business and our team will help ensure that your business is too. Contact the Law Offices of David W. Klasing today to discuss your business with one of our professionals.

In addition to our main office in Irvine, the Tax Law Offices of David W. Klasing has unstaffed (conference room only) satellite offices in Los Angeles, San Bernardino, Santa Barbara, Panorama City, Oxnard, San Diego, Bakersfield, San Jose, San Francisco, Oakland, Carlsbad and Sacramento.

Our office technology allows clients to meet virtually via GoToMeeting. With end-to-end encryption, strong passwords, and top-rated reliability, no one is messing with your meeting. To schedule a reduced rate initial consultation via GoToMeeting follow this link. Call our office and request a GoToMeeting if you are an existing client. 

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Public Contact: Dave Klasing Esq. M.S.-Tax CPA, dave@taxesqcpa.net

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FAQ

What is the significance of the non-prosecution agreement for Bank of Butterfield (NTB)?

The non-prosecution agreement allows Bank of Butterfield (NTB) to avoid criminal prosecution in exchange for cooperation with IRS investigations over tax evasion allegations.

How much has Bank of Butterfield agreed to pay in the settlement with the U.S. government?

Bank of Butterfield has agreed to pay a total of $5.6 million to settle the allegations, primarily for fees related to their services that facilitated tax evasion.

What are the implications of the IRS investigations for U.S. taxpayer-clients of Bank of Butterfield?

U.S. taxpayer-clients may face IRS audits as the bank has agreed to provide the IRS with approximately 386 client files for those potentially non-compliant with U.S. tax laws.

How does the non-prosecution agreement affect Bank of Butterfield's future operations?

The agreement places Bank of Butterfield under stringent oversight for three years, during which any non-compliance could lead to renewed prosecution.

What kind of investigations will the IRS conduct following the Bank of Butterfield NPA?

The IRS plans to ramp up investigations into U.S. taxpayers who may have used foreign accounts for tax evasion, leveraging the information obtained from Butterfield's client files.