Can a Prosecutor Make You Cough Up Your Offshore Account?

Tax Notes Today

In this article, Tim O’Toole, Dawn Murphy-Johnson and George Clarke explore the constitutional validity of consent decrees in cases involving foreign bank account information.

As the IRS and the Justice Department continue their war against offshore bank accounts, more cases are filtering into the courts. Although the authorities often have a rock-solid evidentiary case on tax fraud, conspiracy, or charges based on a violation of the Bank Secrecy Act, there are times when key evidentiary building blocks are missing. That is particularly the case in situations in which the government’s investigation was triggered or at least largely supported by informant data or surreptitiously gathered information. The government may not have an admissible bank statement showing the taxpayer’s ownership. And when it does, there may be evidentiary weaknesses in linking that statement to the taxpayer (such as when ownership in a trust or corporation must be shown). In those circumstances, the government may not be able to prove its case unilaterally, and it needs help from the foreign financial institution.

That may not be much of a hurdle for the government in some cases. However, there will be situations in which the U.S. authorities do not have that sort of leverage over the foreign financial institution. In those situations, the DOJ can be expected to pull an old favorite out of its box of tricks — the "consent decree," when prosecutors force targets to implicate themselves by consent — to authorize the government to collect the information it needs from the foreign bank. This article explores the developments in the law since consent decrees were last in heavy use by the DOJ to see if consent decrees have lost some of their luster since that time.

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