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I was reading about this case in the news - Former Executive of Loyal Bank Ltd Pleads Guilty to Conspiring to Defraud the United States by Failing to Comply with Foreign Account Tax Compliance Act

Here is an excerpt from the opening paragraph.

Earlier today in federal court in Brooklyn, Adrian Baron, the former Chief Business Officer and former Chief Executive Officer of Loyal Bank Ltd, an off-shore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines, pleaded guilty to conspiring to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (FATCA). Baron was extradited to the United States from Hungary in July 2018. The guilty plea was entered before United States District Judge Kiyo A. Matsumoto.

This whole situation strikes me as bizarre. Did Hungary really extradite one of their own citizens to face significant prison time in the United States over not reporting customer accounts to the IRS?

Based on my reading/understanding of FATCA, the United States demands that banks that wish to operate in the US must disclose information about all of their US customers. If they don't, the penalty is either a ban on access to the US banking system, large fines or both. There is no mention that foreign citizens could actually be imprisoned for not complying!

If the article includes all the relevant facts and if all the facts are accurate, this essentially means that nearly everyone in the world is subject to US law and can be prosecuted and imprisoned (assuming an extradition treaty exists) in the US for violating any of them.

Can this be? Are any facts missing here?

  • The threat of a ban is very significant and very severe. Extraditing one citizen is probably a smaller loss than being cut off like that. Furthermore, the crime is "defrauding the United States"; the FATCA is only involved in the particular method of defrauding (by willfully circumventing the act). – zibadawa timmy Sep 13 '18 at 1:49
  • I remember that in 2014, the US declared a travel ban on the head of the Hungarian tax office (and several other tax officers) accusing her of corruption that had disadvantaged US companies: dailynewshungary.com/… A year later, the head of the tax office was replaced. I don't know if this was a consequence of the US accusations or not, but there were voices claiming that this was the case. I could imagine that the "better cooperation" between the US and Hungary are at least partially a consequence of this previous affair? – KlausN Sep 17 '18 at 22:39
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There was more involved according to the US Department of Justice.

“As alleged in the indictment, the defendants engaged in an elaborate multi-year scheme to defraud the investing public of millions of dollars through deceit and manipulative stock trading, and then worked to launder the fraudulent proceeds through off-shore bank accounts and the art world, including the proposed purchase of a Picasso painting,” stated United States Attorney Donoghue. “The charges announced today reflect that this Office, together with our law enforcement partners, is committed to holding accountable those who defraud investors, regardless of the complex schemes they use to hide their ill-gotten gains.” Mr. Donoghue thanked the U.S. Securities and Exchange Commission (SEC), both the New York Regional Office and the Washington, D.C. Office, the City of London Police, the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation for their significant cooperation and assistance during the investigation.

“As alleged, in a series of unscrupulous and illegal trading practices, the defendants contrived a scheme to defraud investors of U.S. publicly traded companies by manipulating stock prices and masking the true ownership of their clients’ financial interests,” stated Assistant Director-in-Charge Sweeney. “In order to discreetly receive their illegal proceeds, the defendants focused their efforts on laundering the money through a variety of means, including the art world, which they believed was a market free from direct regulation. Bringing to justice securities fraudsters and money laundering facilitators who engage in these

See also this more recent Justice Department statement

  • Indeed I did see this part as well, but the conviction I linked to was related only to the FATCA violation. Would Hungary have granted the extradition if they knew there would only be a FATCA conviction? – rayray Sep 12 '18 at 18:01
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    International diplomacy is... diplomacy. That means that a lot of it gets very fuzzy and political. How well the countries are getting along at any given time, and how much they care can matter a lot. In an environment like that, "Oops. I failed to report" and "part of an involved, multi-year attempt to defraud people for millions of dollars" are seen very differently, even if in technical legal terms it's the same act. – Ben Barden Sep 12 '18 at 18:10

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