There is a system whereby foreign banks are obligated to report accounts held by Americans to the US for “anti terrorism” purposes.

Could you give me a name, or at least some link to a government website that describes the system you’re talking about?

Ok, but realistically, the people who would actually attempt tax evasion here wouldn’t be susceptible to any of the above.

Let’s assume a scenario where you have a dual citizen of the US and a South American country that has less than stellar relations with the US government.

Let’s say they obtained their US citizenship by being born in the country during a temporary period of time that the parents resided there. The family decided to move back after a year or two, another 40 years passed, and the kid has grown to be a successful plastic surgeon who runs a self owned clinic and earns $200k income annually. Being aware of their dual citizenship they keep their wealth invested in entities with no US presence and never self-report anything to the IRS.

This is where I am not seeing any way for the IRS to enforce or do anything about this type of tax evasion.

they could also check your bank balance and international holdings against the amount you said you’ve been making and see if it matches up.

Does the IRS have authority to issue such requests to foreign banks? How would the IRS even know what foreign bank to issue these requests to?

Sorry, I have no knowledge about what information is communicated across international borders with regards to the banking world and how this gets tracked on a per-individual basis.

Maybe I’m not understanding what you mean, but if someone works and lives abroad for 330 days of the year they’ll likely have a bank account established within that country so that they don’t have to deal with all of their daily financial activities being international transactions.

If you were employed by a foreign company that has no presence in the US how exactly would the IRS know whether you’ve earning more than $125k?