In recent years, through both traditional means and innovative non-prosecution initiatives, the Internal Revenue Service and the Department of Justice have made substantial contributions to the public fisc, even while underfunded by a largely gridlocked Congress. Yet in a highly publicized report and subsequent hearings, the U.S. Senate Permanent Subcommittee on Investigations (PSI Report) recently accused the IRS and the Justice Department of not adequately investigating or prosecuting offshore accountholders and foreign banks.
There is a fundamental disconnect between this bipartisan view and the experience of many practitioners representing clients affected by initiatives instituted by both the IRS and the Justice Department. Rather, the criticisms lodged in the PSI Report understate significant limitations on the Executive Branch’s ability to pursue investigations in foreign jurisdictions such as Switzerland, including practical considerations of comity and sovereignty and budgetary constraints. Indeed, it could be fairly argued that Congress could help further fair and effective enforcement by fully funding both the IRS and the Justice Department and by ratifying a recently negotiated treaty that could provide law enforcement with access to Swiss banking records.
