Offshore bank exec pleads guilty to FATCA compliance failure

12/09/2018 News Team

A Hungarian bank executive has become the first ever to be convicted of failing to comply with the United State's Foreign Account Tax Compliance Act and now faces a maximum of five years in prison..

Adrian Baron, the former chief business officer and former chief executive officer of Loyal Bank Ltd, an offshore bank with offices in Budapest, Hungary and Saint Vincent and the Grenadines, has pleaded guilty to conspiring to defraud the United States by failing to comply with the FATCA. 

Mr Baron was extradited to the United States from Hungary in July 2018. The guilty plea was entered this week (11 Septmber 2018) at a federal court in Brooklyn, New York.

FATCA is a federal law enacted in 2010 that requires foreign financial institutions to identify their US customers and report information (FATCA Information) about financial accounts held by US taxpayers either directly or through a foreign entity.

According to court documents, in June 2017, an undercover agent met with Mr Baron and explained that he was a US citizen involved in stock manipulation schemes and was interested in opening multiple corporate bank accounts at Loyal Bank. 

The undercover agent informed Mr 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. Mr Baron responded that Loyal Bank could open such accounts and provide debit cards linked to them.

In July 2017, the undercover agent again met with Mr Baron and described how his stock manipulation scheme operated, including the need to circumvent the IRS’s reporting requirements under FATCA.  During the meeting, Mr Baron stated that Loyal Bank would not submit a FATCA declaration to regulators unless the paperwork indicated “obvious” US involvement. 

Subsequently, in July and August 2017, Loyal Bank opened multiple bank accounts for the undercover agent. At no time did Mr Baron or Loyal Bank request or collect FATCA Information from the undercover agent.

He is the second defendant to plead guilty in this case. On 26 July 2018, Arvinsingh Canaye, formerly the general manager of Beaufort Management Services in Mauritius, pleaded guilty to conspiracy to commit money laundering.

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