updated 6:10 PM CEST, Jul 14, 2020

U.S. secures first FATCA conviction as extradited banker pleads guilty

Federal Courthouse, Brooklyn, NY Federal Courthouse, Brooklyn, NY

United States prosecutors registered their first-ever successful prosecution under the Foreign Account Tax Compliance Act, after the former chief executive  and chief business officer of a St Vincent and the Grenadines-based bank pleaded guilty to "conspiring to defraud the United States by failing to comply" with the legislation. 

The banker, Adrian Baron, who had been with Loyal Bank Ltd, had been extradited to the US from Hungary in July, and entered the guilty plea on Sept. 11, according to a U.S. Department of Justice statement.

Loyal Bank is described in the DoJ statement as an offshore bank with offices in Budapest, Hungary and Saint Vincent. 

Baron entered his guilty plea in Federal Court in Brooklyn (pictured above). 

The Department of Justice statement explains how Baron was caught in a sting operation, after he met with an undercover agent in June 2017, who told the banker he was "a U.S. citizen involved in stock manipulation schemes and was interested in opening multiple corporate bank accounts at Loyal Bank."

This agent "informed Baron that he did not want to appear on any of the account opening documents for his bank accounts at Loyal Bank, even though he would be the true owner of the accounts," the statement adds.

The DoJ statement goes on to explain how Baron accommodated the undercover agent's wishes, and "at no time" requested or collected FATCA information from the agent, nor did the bank.

"Baron’s guilty plea represents the first-ever conviction for failing to comply with FATCA," the DoJ statement continued, adding that Baron, who is described as a resident of Budapest, Hungary, faces a maximum of five years in prison.

He is the second defendant to plead guilty in connection with the matter, although the previous defendant, the former general manager of Mauritius-based Beaufort Management Services Ltd, had been charged in connection with money laundering rather than failing to comply with FATCA. 

The case is being handled by the Business and Securities Fraud section of the U.S. Attorney's Office. Assistant United States attorneys Jacquelyn M. Kasulis, Michael T. Keilty and David Gopstein are in charge of the prosecution. 

FATCA obliges banks to report on U.S. account-holders

FATCA is a federal law enacted in 2010 that requires foreign financial institutions, such as banks, to identify their U.S. clients and report certain information about these clients' accounts to the U.S. authorities, either directly or through a foreign entity set up for this purpose. The legislation was introduced in an effort to crack down on the use by certain U.S. taxpayers of non-U.S. accounts, who were making use of these non-U.S. institutions in order to avoid having to pay U.S. tax on some of their earnings. 

Since 2008, when the U.S. crackdown on Americans' overseas bank accounts first began, the government has raked in an estimated US$17bn, while at the same time inconveniencing so many U.S. expatriates in the process that citizenship renunciations have soared, totalling more than 25,000, according to observers who have been monitoring the official data.