American hit with ‘record’ $14m fine, 6 month prison sentence for failing to file FBARs

A resident of the US state of Connecticut who was originally from Korea has been hit with a “record” civil penalty of $14m, a six month prison sentence, and a fine of $100,000 for failing to report Swiss bank accounts totaling around $28m, the US Department of Justice has revealed. 

The sentence was seen by some observers as an indication that the US DoJ is making good on its vow, made towards the end of last year, to significantly increase penalties it levies against offshore tax evaders.

Under US law, Americans and others with US tax obligations, such as permanent residents, are obliged to tell the US tax authorities about any foreign financial accounts they hold that are worth more than $10,000, by filing a so-called FBAR, or Foreign Bank Account Report. Enforcement of this law increased after the signing into law of the Foreign Account Tax Compliance Act, or FATCA, in 2010.

According to a statement issued by the DoJ, Kim is a “sophisticated business executive who ran family businesses with operations in the United States and internationally”. Some “tens of millions of dollars” of his offshore wealth had been inherited, the statement noted, and “stashed in secret accounts at Credit Suisse, its subsidiaries and another Swiss bank”.

In addition, the DoJ said, Kim “conspired with a host of foreign enablers” including his Swiss attorney and un-named bankers “to conceal his assets and income in Swiss accounts held in his own name, the name of a relative, and in the names of sham corporate entities”, and otherwise to “structure financial transactions in a manner that allowed him to utilise [his offshore-held] funds in the United States, while concealing his ownership and control” of them.

In order to do this, the DoJ said, he had had cheques issued to third parties in the United States, in order to purchase a luxury home in Greenwich, Connecticut, a waterfront vacation retreat in Chatham, Massachusetts, and jewelry adorned with multi-carat diamonds, emeralds, and rubies; a “sham entity” was created in order to conceal his ownership of a vacation home.

The DoJ noted that US district court Judge Brinkema had taken Kim’s “cooperation with the government, which occurred [over] more than a five-year span”, into account in pronouncing the sentence on 25 January.

In 2016, as reported, the US authorities hit a US professor of business administration from Rochester, New York with what was said at that time to be the largest FBAR penalty ever – $100m – for hiding $200m in assets.

The $100m was part of a plea agreement with the professor, the US Justice Department said in a statement, which penalty, it noted, was separate from any restitution that the court may eventually also order.

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