Exposing an Abusive Maltese Retirement Arrangement Scheme

Promotors may say that their clients can avoid paying tax by contributing to a foreign individual retirement arrangement in Malta or other countries which allow for uncapped contributions in other forms beyond just cash.

By improperly asserting this as a “pension fund” for U.S. tax treaty purposes, the U.S. taxpayer improperly claims an exemption from U.S. income tax on gains and earnings in, and distributions from, the foreign individual retirement arrangement.

The FATCA requires U.S. taxpayers and foreign financial institutions to report foreign financial accounts and assets to the IRS. Institutions include banks, investment firms, brokers, and insurance companies, among other independent financial entities.

You would think that this law would make it impossible for anyone to hide assets overseas. However, not all financial institutions are honest about their client’s accounts.

Those failing to report foreign accounts or transactions can be heavily penalized. And for good reason if they are involved in a scheme, such as an abusive Maltese retirement arrangement.

Take for instance our client Bradley Birkenfeld, a former UBS banker who blew the whistle, exposing the identities of 4,450 U.S. taxpayers with Swiss bank accounts. UBS faced a penalty of $780 million for engaging in illegal offshore banking practices. Under the IRS whistleblower program, Birkenfeld received an award of $104 million for his information.

Another example: our client Howard Wilkinson. Howard is a former Danske Bank manager and whistleblower who exposed a $230 billion money laundering scheme, in which several banks were involved in moving rubles out of Russia and to New York. The bank was required to forfeit $2 billion to resolve the U.S. investigation. Although this whistleblower reported under the SEC Whistleblower Program.

These are just two examples illustrating how banks deliberately fail to report foreign financial accounts or transactions to the IRS, SEC, DOJ, or other regulators.

It’s very important to perform research before investing in a foreign retirement plan. We suggest contacting an investment advisor before proceeding. Below are some red flags to be on the lookout for when being approached about a Maltese retirement arrangement:

Lack of Transparency

A hallmark sign of this scheme is when the details about how your money will be invested is vague, unclear, or complex. There may also be excessive fees from those who manage such accounts, and when you do ask for information regarding performance or fees, it’s difficult to obtain.

Unsolicited Offers

These schemes almost always begin with a cold call or email from someone using high-pressure sales tactics, such as “you won’t want to miss this opportunity, act now” and the promise of major returns via tax savings.

Investment Restrictions

Most legit investment plans will offer a variety of options that suit your investment risk tolerance. In a Malta pension scheme, you may only notice one option. There may also be restrictions on how much of your retirement savings can be accessed.

Regulatory Issues

Make sure the company offering the retirement plan is registered with the Maltese Financial Services Authority (MFSA). You can check the MFSA’s website for a list of authorized financial institutions: https://www.mfsa.mt/

Overall, the IRS advises to do you due diligence before proceeding with anything that triggers one of the red flags above. Ignoring such red flags may lead to serious penalties down the road. If you have information about an individual or organization behind such a scheme, you may be eligible to receive an award from the IRS. Continue reading to learn more!

Awards for Reporting an Abusive Maltese Retirement Arrangement Scheme

Whistleblowers are key to the detection and prevention of illegal activity. Much so, the IRS is paying whistleblowers awards between 15% to 30% of the proceeds collected or attributable to the information provided by the whistleblower regarding a Maltese retirement scheme.

There are many “positive factors” and “negative factors” that determine this award amount. For example, acting promptly to inform the IRS is a positive factor. However, if you contributed to the underpayment or other noncompliance identified in IRS Form 211, this is considered a “negative factor.” The IRS will consider several factors such as these, which you can learn more about.

Whistleblower Protection

The Taxpayer First Act, signed into law on July 1, 2019, by President Donald Trump, created vital anti-retaliation protections for tax fraud whistleblowers who file claims under the IRS whistleblower program. Protections include the right to reinstatement, no mandatory arbitration, and compensatory damages, as well as expeditious administrative remedies with the right to go to federal court for a jury trial.

Qualifying for An IRS Whistleblower Award

The IRS prioritizes receiving credible and specific information about potential tax violations or underpayments. However, to be eligible for a whistleblower award, the reported tax liability needs to meet certain thresholds.

For individuals, the minimum amount is $200,000, while for organizations, it’s $2 million. If the violation meets these criteria, whistleblowers can proceed with the next steps in the process, which is filling out IRS Form 211: the application for whistleblowers to submit information to the IRS regarding violations of tax law. This application is also to apply for an award.

If you have information about an abusive Maltese retirement arrangement, we suggest you get in touch with an IRS whistleblower attorney today to learn about your options and rights. Having an attorney representing you can increase your chances of receiving the highest award possible.

Having an attorney will also ensure your identity is kept confidential. There are no provisions for anonymous whistleblowing, but the IRS has stated that it will keep the whistleblower’s identity confidential if they decide to file a tax fraud report (Form 211).

Our firm is behind over a third of all IRS whistleblower cases. We’ve been involved in writing the rules that govern the IRS whistleblower program and have been representing whistleblowers since 1988. If you have information of a Malta retirement arrangement, get in touch today for a free and confidential case evaluation. We represent most whistleblowers on a “contingency” basis. Meaning, we don’t charge a fee unless we win your case.