The Internal Revenue Service’s war on offshore tax evasion has shifted to the Caribbean theater. The target is Barbados-headquartered CIBC FirstCaribbean International Bank, whose branches dot the sunny islands.

From interviews with tax evaders seeking protection under the IRS’s Offshore Voluntary Disclosure Program, revenue agents learned that at least 129 U.S. taxpayers hid assets at the bank, which is a subsidiary of publicly traded Canadian Imperial Bank of Commerce.

The feds figure other cheaters with accounts at CIBC FirstCaribbean haven’t fessed up, and the hunt for them is on.

Accountholders who have done nothing illegal and are compliant with tax and other reporting requirements have nothing to fear, experts say.

But anyone hiding assets “should quickly come forward with counsel and disclose their assets using the Offshore Voluntary Disclosure Program before the IRS gets to them,” says attorney James M. Duggan, a founding principal of Duggan Bertsch LLC, a Chicago-based planning firm. The program lets taxpayers get square on the taxes they owe, pay penalties and avoid criminal prosecution, he explains.

“Everybody who commits tax evasion probably also commits felony money laundering as well as wire fraud or mail fraud,” points out international tax attorney Gary S. Wolfe of The Wolfe Law Group in Los Angeles.

“Let’s say you don’t pay tax on $1 million and you use it to buy a house, jewelry or art. That’s money laundering. Wiring untaxed money is wire fraud. Mailing a check of untaxed money is mail fraud,” Wolfe says. Each of these felonies carries severe penalties—more reason for coming in from the cold.

With a special order obtained from a federal court on April 29, the IRS intends to subpoena the records of CIBC FirstCaribbean’s correspondent bank account at Wells Fargo. A correspondent is a bank that is used by another bank—in this case, an American bank used by a foreign bank. Examining the correspondent account at Wells Fargo will tell the IRS the names of CIBC FirstCaribbean accountholders, their account balances and the earnings generated in the account, information about deposits, including endorsements on checks, instructions on wire-transfer records and more.

“The IRS is seeking evidence of U.S. accountholders who moved funds to CIBC FirstCaribbean then repatriated those undeclared assets to the U.S.,” says a former federal prosecutor, Charles Intriago, now president of the Miami-based Association of Certified Financial Crime Specialists.

Even though the court has issued what’s known as a John Doe summons, concerned individuals can still participate in the federal disclosure program. However, once the IRS gets the dirt on a specific taxpayer, it is generally too late for that individual to avoid criminal prosecution.

But the disclosure program entails risk, warns Wolfe. The feds can eject taxpayers from the multi-step process—and its protections—anywhere along the line, including after they’ve divulged incriminating information.

That happened in March to tax cheats who had used Israel’s Bank Leumi.  “Fairness” will be considered in meting out punishment to these individuals, an IRS official was quoted as saying in a Forbes report.  But Wolfe calls the IRS disclosure program “a ruse, a way to smoke people out.” Working with savvy counsel is essential.

Duggan reminds both practitioners and taxpayers that the IRS can force a financial advisor—someone not protected by attorney/client privilege—to testify that a client admitted to tax evasion. “It’s critical that conversations remain privileged, so taxpayers should speak only with lawyers,” Duggan says.

Non-lawyers can help by reminding clients of their compliance obligations. Wolfe says, “On Line 7 of Form 1040 Schedule B you have to declare your offshore accounts. You may have to file IRS Form 8938 to disclose ownership of foreign financial assets. And by June 30 of every year, you’ve got to file FBARs [Report of Foreign Bank and Financial Accounts] for every account over $10,000 that you either own or have signature authority over.”

Advisors can also warn clients about the feds’ next targets, Duggan says. Banks in Singapore, the British Virgin Islands, Cayman Islands and Cook Islands are the focus of a tax-information sharing collaborative announced in May involving the U.S., U.K. and Australia.

Separately, the U.S. and Switzerland reached an agreement late last month that will allow Swiss banks to disclose information about customer accounts to U.S. authorities, Intriago adds.

Finally, Intriago advises telling clients about FATCA, the Foreign Account Tax Compliance Act. Starting next year, all offshore banks—even those in traditional secrecy havens—will have to disclose to the IRS their U.S. customers’ identities, or 30 percent of what they receive from U.S. banks will be withheld.

“FATCA is going to produce a lot of revelations to the IRS, and other U.S. agencies when appropriate, about accounts that foreign banks hold for U.S. taxpayers,” Intriago says. “Tell private wealth clients, if they haven’t paid taxes on their offshore accounts, the IRS will find them out.”

And if that happens before they come clean, Wolfe says you can quote them Bob Dylan:  “A hard rain’s a-gonna fall.”

Even in the sunny Caribbean.