Senate Press Release and Report on Offshore Evasion Through Shell Banks Skirting FATCA (8/28/22)

Senator Wyden led a major Senate Finance Committee investigation that produced a press release and report about use of “shell bank” to avoid the FATCA reporting requirements.  See the press release titled Wyden Investigation Uncovers Major Loophole In Offshore Account Reporting, here, and the report titled The Shell Bank Loophole, here.  The press release offers a good summary of the report (see particularly the “Key Findings” in the press release).

The following are summaries of the key points that readers of this blog may be interested in:

1. The gambit requires that the shell bank be registered with the IRS.  The press release says that establishing a shell bank with foreign accounts that do not get reported to the IRS is simple:

The key steps:

1. Establish a shell company in a FATCA partner jurisdiction, even those in well-known tax haven jurisdictions like Bermuda or the British Virgin Islands.

2. Submit IRS form 8957 to register the shell company as a foreign financial institution and obtain a Global Intermediary Identification Number (GIIN).

3. Open an account at a bank in Switzerland, or other FATCA partner jurisdiction, in the name of the shell company now registered as a financial institution. Use an attorney or other intermediary as the signatory of the account.

4. Invest in private equity firms or other investment vehicles and direct the fund manager to wire proceeds from investment activities in the United States to the shell company’s account in Switzerland or elsewhere.

The results:

•  The Swiss bank is no longer required to report that the account is held by U.S. persons because the account is held in the name of an entity with a valid GIIN number. The Swiss bank is also no longer required to conduct due diligence to determine whether the account has a U.S. nexus.

•  The shell company is now operating as a “shell bank” and can self-certify reporting offshore accounts to IRS for FATCA purposes.

•  In the absence of an audit or other federal investigation, is it highly unlikely the IRS will detect whether these accounts are concealing or underreporting assets held by U.S. persons.

USAO SDNY and Bank of Butterfield Enter NPA (8/3/21)

The USAO SDNY has issued this press release:  Manhattan U.S. Attorney Announces Agreement With Bermudian Bank To Resolve Criminal Tax Investigation: The Bank of N.T. Butterfield & Son Limited Pays $5.6 Million in Forfeiture and Restitution; Receives Non-Prosecution Agreement as a Result of its Cooperation, here.  The combined NPA and Statement of Facts are linked in the press release; direct link is here.

Key excerpts from the press release:

Audrey Strauss, the United States Attorney for the Southern District of New York, Stuart M. Goldberg, Acting Deputy Assistant Attorney General of the Justice Department’s Tax Division, and James C. Lee, Chief of the Internal Revenue Service, Criminal Investigation (“IRS-CI”), announced today that Bank of N.T. Butterfield & Son Limited (“BUTTERFIELD”) entered into a non-prosecution agreement (“NPA”) with the U.S. Attorney’s Office and agreed to pay $5.6 million to the United States for assisting U.S. taxpayer-clients in opening and maintaining undeclared foreign bank accounts from 2001 through 2013.  The NPA was based on BUTTERFIELD’s extraordinary cooperation, including its efforts in providing 386 client files for non-compliant U.S. taxpayer-clients, and provides that BUTTERFIELD will not be criminally prosecuted.  The NPA requires BUTTERFIELD to forfeit $4.896 million to the United States, representing certain fees that it earned by assisting its U.S. taxpayer-clients in opening and maintaining these undeclared accounts, and to pay $704,000 in restitution to the IRS, representing the approximate unpaid taxes arising from the tax evasion by BUTTERFIELD’s U.S. taxpayer-clients.

Bank Hapaolim Increases Its Reserve for U.S. DOJ Tax Investigation (3/19/19)

Israel's Bank Hapoalim Q4 net profit sinks on U.S. tax probe provision (Reuters 3/18/19), here.  Excerpt:

The bank said earlier this month it would set aside an additional $246 million in the quarter to cover a possible future settlement regarding an investigation of the bank’s business with U.S. clients. This provision will bring its total provisions to $611 million.

The excerpt does not state specifically that the $611 million relates to the U.S.tax  investigation, but that is the inference.  (See also the relative numbers reported Bank Hapoalim 2018 results: profits dip on US probe provision (Retail Banker International 3/18/19), here.)

UBS Reportedly Going to Trial in French Case (3/21/17)

Reuters has this report:  Joshua Franklin and Maya Nikolaeva, UBS faces French trial in long-running tax case (Reuters 3/20/17), here.  Excerpts:

UBS (UBSG.S) and its French subsidiary face trial in France after a long-running investigation into allegations that the Swiss bank helped wealthy clients avoid taxes. 

* * * * 

French magistrates have ordered that UBS stand trial on charges of aggravated tax fraud and money laundering as well as illegally offering related services, a judicial source said. 

* * * * 

Magistrates were expected this week to order a trial after negotiations failed to produce a settlement in the long-running probe into allegations UBS helped clients avoid taxes, Reuters reported on Sunday. 

French newspaper JDD said UBS had rejected a 1.1 billion euro ($1.18 billion) settlement proposed by prosecutors. 

The JDD quoted Markus Diethelm, UBS's group general counsel, as saying a 1.1 billion euro payment was "unthinkable" and out of line with similar settlements reached in other countries.

The report also offers UBS's response, the the standard one for the guilty and the innocent to this type development:

"We will now have the possibility to respond in detail in a court of law," UBS said in an emailed statement on Monday. "UBS has made clear that the bank disagrees with the allegations, assumptions and legal interpretations being made."

The report offers the following related development:

French authorities are also investigating HSBC Holdings (HSBA.L) and last year a source familiar with the matter said the country's financial prosecutor asked for a trial of Europe's biggest bank and its Swiss private banking unit over allegations it helped customers dodge taxes in 2006-2007.

Articles on ICIJ's Panama Papers and Ramifications (5/9/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Andrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

ICIJ's searchable database released 5/8/16, here.  The searchable database has this opening disclaimer:

There are legitimate uses for offshore companies and trusts. We do not intend to suggest or imply that any persons, companies or other entities included in the ICIJ Offshore Leaks Database have broken the law or otherwise acted improperly. Many people and entities have the same or similar names. We suggest you confirm the identities of any individuals or entities located in the database based on addresses or other identifiable information. If you find an error in the database please get in touch with us.

The page has links and allows users to download the database (or subsets of it in csv format) here.  I love databases but am not familiar with the database ICIJ uses:  Neo4j, here, a graph database engine that structures data in nodes (the icons you see in the visualization) and edges (the links between nodes).  I plan to try to dig into the database later, but will probably first poke around the cvs files (viewable in Excel) to see the scope of what is there.

ICIJ releases database revealing thousands of secret offshore companies (ICIJ 5/9/16), here.

The new data that ICIJ is now making public represents a fraction of the Panama Papers, a trove of more than 11.5 million leaked files from the Panama-based law firm Mossack Fonseca, one of the world’s top creators of hard-to-trace companies, trusts and foundations. 

ICIJ is not publishing the totality of the leak, and it is not disclosing raw documents or personal information en masse. The database contains a great deal of information about company owners, proxies and intermediaries in secrecy jurisdictions, but it doesn’t disclose bank accounts, email exchanges and financial transactions contained in the documents. 

* * * * 

The Panama Papers underscore the fundamental injustices and inequalities created by the offshore system, media commentators and political leaders say. 

“When taxes are evaded, when state assets are taken and put into these havens, all of these things can have a tremendous negative effect on our mission to end poverty and boost prosperity,” Jim Yong Kim, the president of the World Bank, said as he opened the spring meetings of the World Bank and IMF in Washington soon after ICIJ and more than 100 other news organizations began revealing the results of the media collaboration’s investigation. 

President Barack Obama, meanwhile, pointed out that the biggest problem was that many of the schemes revealed by the Panama Papers were legal. “It’s not that they’re breaking the laws, it’s that the laws are so poorly designed,” he said. 

Articles on ICIJ's Panama Papers and Ramifications (5/6/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Andrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

Scott Shane and Eric Lipton, Panama Papers Source Offers to Aid Inquiries if Exempt From Punishment (New York Times 5/6/16), here.

The anonymous source behind the huge leak of documents known as the Panama Papers has offered to aid law enforcement officials in prosecutions related to offshore money laundering and tax evasion, but only if assured of protection from punishment.
“Legitimate whistle-blowers who expose unquestionable wrongdoing, whether insiders or outsiders, deserve immunity from government retribution,” the source, who has still not revealed a name or nationality, said in a statement issued Thursday night. 

The documents, which list the true owners of thousands of companies created to hide the people behind them, expose the holdings of current and former world leaders and other prominent figures. The source, who uses the pseudonym John Doe but whose gender is not known, said that the papers could spur thousands of prosecutions, “if only law enforcement could access and evaluate the actual documents.” 

John Doe noted that journalists who have viewed the papers have said they will not turn over the full archive of 11.5 million documents. “I, however, would be willing to cooperate with law enforcement to the extent that I am able,” the source wrote.
The statement, which was issued Thursday night under the condition that it not be reported until Friday morning, gave some hints about John Doe’s political views and concerns. They include income inequality, the American campaign finance system and the “revolving door” of United States officials who take jobs at banks or other companies they once regulated.

Tonya Somander, President Obama's Efforts on Financial Transparency and Anti-Corruption: What You Need to Know (White House Blog 5/6/16), here

What do today’s actions do to help address this kind of financial abuse?  

Today, the Treasury Department took several steps to increase transparency and disclosure requirements. 

First, the Treasury Department finalized its “customer due diligence” rule, which requires financial institutions – such as banks , mutual funds, and other financial institutions – to find out and verify who actually owns and profits from the companies that make use of their services, i.e, the “beneficial owner.” Under this rule, if an entity (like a shell company) opens an account at a financial institution, that institution will be required to identify and verify the real people actually behind that entity. And law enforcement can then seek out that information from those institutions. 

By requiring disclosure of beneficial ownership information, we will increase financial transparency and give financial institutions and law enforcement the ability to identify the assets and accounts of criminals and national security threats. 

Now, while the beneficial owners of shell companies often exploit weak rules in offshore tax havens, gaps also exist in U.S. tax rules that foreigners can currently exploit to set up and hide their assets or financial activity in an anonymous shell company in the United States.

So the second step Treasury took today is to propose a rule that would plug this gap by requiring certain foreign-owned companies to obtain a tax identification number from the IRS, thereby requiring these entities to report ownership and transaction information to the IRS. 

Taken together, these steps go a long way in helping to combat money laundering and tax evasion, but additional tools are needed to promote transparency and strengthen law enforcement. And only Congress can help on that front.  

Articles on ICIJ's Panama Papers and Ramifications (5/1/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Andrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

Frederik Obermaier, Bastian Obermayer, Vanessa Wormer and Wolfgang Jaschensky, About the Panama Papers (Süddeutsche Zeitung), here.  A great report (with links) from the newspaper and reporters that originally obtained the data.

Coming Soon: ICIJ to Release Panama Papers Offshore Companies Data (ICIJ 4/26/16), here.

The International Consortium of Investigative Journalists will release on May 9 a searchable database with information on more than 200,000 offshore entities that are part of the Panama Papers investigation. 

The database will likely be the largest ever release of secret offshore companies and the people behind them. 

* * * * 

While the database opens up a world that has never been revealed on such a massive scale, the application will not be a “data dump” of the original documents – it will be a careful release of basic corporate information . 

ICIJ won’t release personal data en masse; the database will not include records of bank accounts and financial transactions, emails and other correspondence, passports and telephone numbers. The selected and limited information is being published in the public interest. 

Meanwhile ICIJ, the German newspaper Süddeutsche Zeitung which received the leak, and other global media partners, including several new outlets in countries where ICIJ has not been able to report, will continue to investigate and publish stories in the weeks and months to come.

Meta S. Brown, Why Panama Papers Journalists Use Graph Databases (Forbes 4/30/16), here.

Articles on ICIJ's Panama Papers and Ramifications (4/22/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

Julia Harte, Journalists will not share Panama Papers with Justice Department (Reuters 4/21/16), here.

The media group that coordinated the Panama Papers investigation into offshore companies said on Thursday it would not participate in a criminal probe by the U.S. Department of Justice. 

"ICIJ, and its parent organization the Center for Public Integrity, are media organizations shielded by the First Amendment and other legal protections from becoming an arm of law enforcement," said Gerard Ryle, director of the consortium, in a press release on the group's website.

Martha M. Hamilton and Hamish Boland-Rudder, Banks Ordered to Provide Info on Panama Dealings to NY Regulator, here.

More than a dozen banks will have to turn over details of their dealings with Panama law firm Mossack Fonseca to New York’s banking regulator, as authorities continue to respond to revelations from the Panama Papers investigation.

The order came from the New York Department of Financial Services and was sent to 13 foreign banks identified in articles published by ICIJ and its media partners, including Deutsche Bank AG, Credit Suisse Group AG, Commerzbank AG and ABN Amro Group NV, Bloomberg reported. 

The banks have been given 10 days to respond, and were asked to provide communications, phone logs and records of transactions between their New York branches and employees or agents of Mossack Fonseca, as well as any subsequent communication with shell companies formed as part of these transactions. According to Bloomberg, the regulator has also asked banks to identify any New York-based personnel who may have held positions at the shell companies. 

The regulator is reportedly searching for potential violations of rules or regulations related to the law firm. The banks have not been accused of wrongdoing.

Panama Papers: About 80 serious Australian criminals named in leaked documents, ATO says (ABC News 4/21/16), here.

Articles on ICIJ's Panama Papers and Ramifications (4/20/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

Josh Meyer, Panama Papers: Federal Prosecutor Looking for Crimes By U.S. Citizens (NBCNews 4/10/16), here.

The Justice Department has opened a formal criminal investigation into potentially widespread illegalities exposed by the Panama Papers, the massive leak of financial details about secret offshore accounts, federal law enforcement officials told NBC News Wednesday -- and its first priority will be finding wrongdoing by U.S. firms and individuals. 

The U.S. Attorney for the Southern District of New York, Preet Bharara, confirmed the investigation in a letter written to the International Consortium of Investigative Journalists (ICIJ), which has led a worldwide effort to report on suspected money laundering, tax evasion and other criminal activity exposed in the documents.
Many financial transactions related to global money laundering, drug trafficking and other illegal activity involve New York-based banks. A senior federal law enforcement official said the initial focus will be identifying illicit activity by American citizens and corporations. 

Bharara's efforts are the first evidence that criminal prosecutors from the Justice Department have become involved in the Panama Papers and will be looking for wrongdoing by U.S. companies and citizens. NBC News reported Sunday that IRS and U.S. Treasury officials have met with their counterparts from around the world in an effort to analyze and use the data about more than 214,000 offshore companies listed by Panamanian law firm Mossack Fonseca. 

In his brief letter, Bharara simply said that his office -- which has jurisdiction over many of the world's largest banks and financial firms -- has "opened a criminal investigation regarding matters to which the Panama Papers are relevant." 

* * * * 

Articles on ICIJ's Panama Papers and Ramifications (4/17/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

Nicholas Shaxson, Five myths about tax havens (WAPO 4/15/17), here. I think the author uses the term myth to be falsehoods (or not truthoods).  The first myth is:

1. Tax havens protect vulnerable people against despotic governments, unjust laws and political turmoil.

The author addressed this myth:

One benefit of tax havens, to listen to economists such as Cato Institute senior fellow Daniel Mitchell, is that they help shield oppressed groups from greedy and corrupt regimes. The “financial privacy laws” that govern tax havens make them especially “attractive to people who live in nations plagued by incompetent and/or venal governments,” Mitchell argued in a 2008 Cato-produced video titled “The Moral Case for Tax Havens.” The most famous version of this myth was first peddled in 1966 by the Schweizerische Kreditanstalt (today’s Credit Suisse), suggesting that Swiss bank secrecy was set up to protect Jewish money from the Nazis. 

In reality, Switzerland’s famous banking secrecy law of 1934 was triggered by a French tax-evasion scandal involving several wealthy elites, and Swiss secrecy wound up protecting a ton of Nazi loot. Tax havens shield the money of rich people, not vulnerable ones. Indeed, the Panama Papers revealed offshore accounts associated with several dictators and members of oppressive regimes from around the globe, and few linked to ordinary citizens. When tax havens assist kleptocratic elites in hiding their cash with impunity, they don’t guard against corruption and despotism — they help perpetuate them. Tax havens provide an escape route from laws that is available only to a rich minority that can afford to use it, thus removing from the equation the constituency with the greatest power to push for reform.

There are four more.  Enjoy!

David Lawder, U.S. Treasury readies new tax rules as G20 vows to fight evasion (Reuters 4/16/16), here.

The U.S. Treasury Department is finalizing new tax rules aimed at combating the use of shell companies to evade taxes, U.S. Treasury Secretary Jack Lew said on Saturday amid increased pledges by global finance leaders to cooperate on tax issues. 

In a statement to the International Monetary Fund's steering committee, Lew said the Treasury was finalizing a rule that would require banks to identify the beneficial owners of new customers that are companies. 

"In addition, we are about to propose a regulation that would require the beneficial owners of single-member limited liability companies to identify themselves to the Internal Revenue Service, thus closing a loophole that some have been able to exploit," Lew said. 

In the wake of controversy stirred by the so-called Panama Papers, which revealed widespread use of tax havens and shell companies by wealthy global elites, officials from the Group of 20 major economies on Friday threatened to penalize tax haven countries that do not comply with new information-sharing efforts and moves to reduce tax mismatches between countries. 

They called for criteria by July to identify non-cooperative jurisdictions. 

"Defensive measures will be considered by G20 members against non-cooperative jurisdictions" if progress toward tax goals is not made, the group said in its statement.
Lew said the United States fully supports calls for all countries to automatically exchange financial account information.

Articles on ICIJ's Panama Papers and Ramifications (4/16/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.

Leonid Bershidsky, Were the Panama Papers Planted? Who Cares (Bloomberg View 4/15/16), here.

The opening salvo

Last week, a respected Russia scholar in the U.S. speculated that the Kremlin might be behind the so-called Panama Papers, the big dump of data about offshore accounts that has implicated several countries' officials in shady dealings. And on Thursday, President Vladimir Putin of Russia blamed the U.S. for the leak.

And the closing:

But I would argue that, in the end, that the provenance isn't important -- only the accuracy of the data is. 

Putin has confirmed that the Russian part is accurate. The information is, of course, more damaging than Putin is willing to admit: It exposes the inner workings of Russia's crony capitalism. he material also has proved accurate regarding accounts of people from Iceland, Spain, the U.K. and elsewhere. So why get hung up on its source? It makes much more sense to applaud the work of the investigative journalists who checked and developed the leak. It's an extraordinary collective performance by a much-maligned professional community that has proved convincingly that it has an important social role to play. 

Andrew Mayeda and Mark Deen, G-20 Threatens Penalties on Tax Havens After Panama Papers (Bloomberg 4/15/16). here.

Group of 20 economies threatened to penalize havens that don’t share information on their banking clients after the leak of the Panama Papers provoked a global uproar over tax evasion. 

The G-20 will consider “defensive measures” against financial centers and jurisdictions that don’t commit to an international standard requiring the exchange of information about account holders, the group’s finance ministers and central bankers said Friday in a statement after meeting in Washington. 

The group said it would work with the OECD to come up with criteria for identifying “non-cooperative jurisdictions” by July, adding that improving the transparency on who controls legal tax entities is vital to the international financial system. 

* * * * 

Global Standard 

The statement refers to a global standard developed by the OECD and endorsed by the G-20. The standard calls on tax jurisdictions to share information on an annual basis about their banking systems, including the names and tax identification numbers of account holders. 

The language on tax and financial transparency amounts to a victory for major European nations including the U.K., France and Germany, who a day earlier agreed to automatically share information on the ultimate owners of companies and trusts.
China put up the most resistance to the tax-related part of the G-20 statement, and the U.S. was also reluctant, according to two G-20 officials familiar with the talks; one person said China was the main reason why the statement didn’t single out Panama. The officials asked not to be identified because the meetings were private. 

* * * * 

Bright, Dark

Articles on ICIJ's Panama Papers and Ramifications (4/14/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.  

Max Ehrenfreund, What the Panama Papers don’t say about global finance is just as troubling (WAPO 4/14/16), here.  Another view of the unintended consequences of the developed world's crackdown on offshore financial activity.

Banks' disparate treatment of suspect financial activity suggests that new regulations in the United States and other developed countries, intended to prevent illicit activity, could be detrimental for charities and some less wealthy economies. 

"What the Panama Papers scandal makes really clear is if you’ve got a lot of money, you can get a bank to break more or less any law you want," said Scott Paul, a senior adviser at Oxfam America. "If you don’t have a lot of money, banks will close the door in your face just because of the risk of illegality." 

* * * * 

Yet since the financial crisis made banking less profitable, some banks have decided that vetting their less affluent, less lucrative customers isn't worth the expense, experts say. In part because of the risk of scrutiny from regulators and the press, firms such as Bank of America and Barclays are now reluctant to do business in poor countries where lawbreaking is more common.\ 

Banks' withdrawal from some markets in East Africa, the Middle East, Latin America and other regions has provoked an international debate about the costs and benefits of authorities' efforts to counter illicit finance. 

"Until very recently, there really wasn't a conversation," Paul said. Without careful attention from policymakers, he warned, "it's going to be poor populations and these high-risk jurisdictions that get cut out of the financial system."  

Diplomats and charities have lost their accounts. Meanwhile, migrants working in developed countries as breadwinners for their families in poorer nations are paying more to send them money through informal channels. In the private sector and among nonprofit groups, some worry that rules issued by the U.S. government, along with the European Union and a 35-nation body called the Financial Action Task Force, are making the problem worse. 

Regulators must balance "restrictions that you want to put in place to keep the bad guys out" against "restrictions so strong that you keep the good guys out, too," argued Rob Rowe, a vice president at the American Bankers Association. "There's no easy answer." 

* * * * 

"We recognize that reduced access could impede the flow of money for a family member in need," Szubin said, but he added, "We don't yet see evidence of systemic retrenchment -- and even if we truly are seeing some consolidation, we have not yet identified its scope."

I work for a Swiss Private Bank and serve wealthy Russians (Reddit 4/9/16), here.  Still another view of the offshore account morass.

For 7 years I have been working in Swiss Private Banking, serving wealthy Russian clients. I work with offshore company accounts every day. Many of our clients also had their data leaked together with the 200k other companies. In my old job I even had a meeting with one of the top managers of Mossack Fonsecca but never directly sent clients to them. 

Defending what I do here on reddit is probably as popular as justifying paedophiles so I'm prepared to get insulted. I know that I am doing good work and made peace with the fact that most people probably always will hate me for what I do. 

Anyway, I want to clear up some misconceptions and write about what people like me do and how our industry works. I actually see the recent leaks as a great opportunity for banks like mine to show to the world that they did their homework and that the bad apples that give my profession a bad reputation get sorted out.

Articles on ICIJ's Panama Papers and Ramifications (4/13/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.  

Panama papers: Mossack Fonseca headquarters raided (4/13/16), here.

Police carried out Tuesday's raid along with officials from an organised crime unit. Officers set up a perimeter around the headquarters while prosecutors entered the offices to search for documents. 

Afterwards, the attorney general's office said the aim had been "to obtain documentation linked to the information published in news articles that establish the use of the firm in illicit activities". 

The statement added that searches would also take place at subsidiaries of the firm.

Elida Moreno, Panama raids offices of Mossack Fonseca law firm (Reuters 4/13/16), here.

The national police, in an earlier statement, said they were searching for documentation that "would establish the possible use of the firm for illicit activities." The firm has been accused of tax evasion and fraud.

Peter J. Henning, Panama Papers Show How Lawyers Can Turn a Blind Eye (NYT DealBook), here.
Peter Hemmings is a frequent writer on white collar crime.

During the savings-and loan-crisis in the early 1990s, the question “Where were the lawyers?” was asked about the wrongdoing taking place at numerous banks. 

The confidential documents known as the Panama Papers, which show how lawyers helped set up offshore bank accounts and shell companies, provides one possible answer: The lawyers have always been right in the middle of it. 

This is not the only recent example of lawyers acting as willing participants in trying to help clients, while seemingly turning a blind eye to possible violations of the law. A report issued by the nonprofit organization Global Witness, featured on the “60 Minutes” news program in January, included undercover videos of lawyers in New York who appeared quite eager to advise the mysterious representative of an African minister about how to move funds into the United States to buy assets while keeping his ownership anonymous. 

Rather than seeking to keep clients from violating the law, it appears that some lawyers are willing to go right up to the line of legality in their representation. By keeping themselves ignorant about what may be going on, these lawyers have been able to maintain the facade that they are not involved in potentially illegal activities, even though they are often the prime enablers of misconduct. 

Has the legal profession lost its moral compass?

 The article concludes:

It is no surprise that lawyers are at the center of the debate about how to deal with the use of shell companies and secret accounts to hide assets because lawyers are frequently involved in structuring the entities. Despite the elevated rhetoric about the role of lawyers in society, the legal ethics rules do little to restrict how lawyers can represent clients who flirt with the edges of the law. 

Limiting the tools for helping clients engage in misconduct would make it harder for lawyers to claim they are only serving the wishes of those clients.

Articles on ICIJ's Panama Papers and Ramifications (4/12/16)

I've been traveling most of the day, so don't have much to offer.  I'll be back up and running in full stride tomorrow.

Eamon Javers, Swiss banker whistleblower: CIA behind Panama Papers (CNBC 4/12/16), here.  This article quotes Bradley Birkenfeld as saying that "the CIA I'm sure is behind this."  Well.

Panama Papers: Spy agencies widely used Mossack Fonseca to hide activities (RT 4/12/16) here. Excerpts:

Intelligence agencies from several countries, including CIA intermediaries, have abundantly used the services of Panamanian law firm Mossack Fonseca to "conceal" their activities, German newspaper Sueddeutsche Zeitung (SZ) says, citing leaked documents. 

Both "secret agents and their informants have used the company's services," wrote the newspaper, which earlier this month published online materials based on 11.5 million documents from the Panamanian law firm. It has been called the largest leak on corruption in journalistic history. 

"Agents have set up shell companies to conceal their activities," the Munich-based newspaper reported, adding that there are CIA mediators among them. 

According to SZ, Mossack Fonseca's clients also included some of those involved in the so-called Iran-Contra affair, in which several Reagan administration officials secretly facilitated arms sales to Iran in the 1980s in order to secure the release of US hostages and fund Nicaragua's Contra rebels. 

The Panama Papers also claim to reveal that some "former high-ranking officials of the intelligence services of Saudi Arabia, Colombia and Rwanda" are listed amongst the company's clients. Among them was Sheikh Kamal Adham, the former Saudi intelligence chief, who according to SZ, was "one of the CIA's key intermediaries in the 1970s" in the Middle East region.

Holly Watt, Panama Papers: global tax officials to launch unprecedented inquiry (Guardian 4/12/16), here.  Excerpts:

Tax investigators from 28 countries will meet in Paris on Wednesday to launch an unprecedented international inquiry following the publication of the Panama Papers.
Senior officials from tax authorities around the world have said they intend to work together to analyse information revealed by the documents, which have provoked international concern over the offshore industry. 

Investigations have been launched in a number of countries over the past week, but the Paris meeting will be an attempt to develop a global strategy to crack down on offenders.
The sheer scale of the leak – 11.5m documents, covering 210,000 companies in 21 offshore jurisdictions – has led to Wednesday’s hastily arranged meeting.

Articles on ICIJ's Panama Papers and Ramifications (4/11/16)

Crawford Kilian, The Man Who Foretold the Panama Papers (The Tyee 4/5/16), here.  This is a book review of Thomas Piketty's new book, Why Save the Bankers? And Other Essays on Our Economic and Political Crisis, here, which was just published.  Piketty, here, is the author who stirred the global pot with his massive Capital in the Twenty-First Century, here, with more data and analysis of data than most of us want to think about much less read. (I have heard that Piketty's book has the lowest number of actual readers among persons who have purchased the book; disclaimer: I too purchased it and have yet to read it other than episodically.)  The book being reviewed here is a collection of other smaller works by Piketty that develop and sometimes predate publication of Capital in the Twenty-First Century.  Here are some excerpts (bold face-supplied by JAT):

But why bother to buy a scrapbook of ancient columns when you can read Capital in the Twenty-First Century? For one very good reason.

The world's greatest economic detective 

Because Thomas Piketty follows the money. He goes into the tax archives of the last two centuries, and he has become the greatest economic detective the world has ever known. He has tracked the wealth of the rentier class since Napoleon -- the families of the "independently wealthy" who live off the income paid them because they own moneymaking enterprises and land.  

In one column, published five years ago on April 5, 2011, Piketty offers what is almost a throw-away line: "... at the world level, the net financial position is negative over-all, which is logically impossible unless we assume that on average we're owned by the planet Mars. More likely, this contradiction suggests that a nonnegligible share of financial assets held in tax havens and by nonresidents is not correctly reported as such." 

In other words, every country in the world is losing money, and therefore losing tax revenue. The implication is that every country is making up for the loss either by taxing its poorer residents more than they should be, or by cutting social services.
Five years later, almost to the day, the Guardian and the German newspaper Süddeutsche Zeitung broke a major global scandal: the Panama Papers.

Piketty's colleague, Gabriel Zucman, published on that issue in the The Hidden Wealth of Nations: The Scourge of Tax Havens (2015), here.

Juan Carlos Varela (President of Panama), Don’t Blame Panama. Tax Evasion Is a Global Problem (NYT 4/11/16), here.

DESPITE their name, the Panama Papers are not mainly about Panama. They are not even primarily concerned with Panamanian companies. The more than 11 million documents, illegally hacked and released last week relating to previously undisclosed “offshore” corporations, is roiling the world with revelations of the vulnerability for rampant abuse of legal financial structures by the wealthy. 

They are unfairly called the Panama Papers because this particular trove of documents came from a single law firm based in Panama. But the problem of tax evasion is a global one. 

Panama does not deserve to be singled out on an issue that plagues many countries. But we are willing to accept the responsibility for fixing it, in part because greater transparency is ultimately a continuation of reforms we have recently undertaken. The world must tackle this problem collectively and with urgency, and Panama stands ready to lead the way.

Articles on ICIJ's Panama Papers and Ramifications (4/10/16)

Introduction:  The following Wikipedia entries may offer updated information from time to time:

• Wikipedia entry on Panama Papers, here.
• Wikipedia list of people named in Panama Papers, here.

In addition, this searchable list from the Sunday Times might be worth consulting from time to time.  Josh Boswell, Tom Wills, Aendrew Rininsland, Panama papers: the names: Search our database of 37,000 names linked to Mossack Fonseca companies in the tax haven of Panama (Sunday Times 4/10/16), here.  The linked page offers at the bottom a downloadable zip file with the data, here, which includes a csv file which is apparently 102.54 MB in size (presumably this could be imported into an MS Excel file, although I have not yet done that) and a "README.TXT" file to explain certain matters about the data.  Apparently this file lists the companies and directors, shareholders, and legal agents for the companies.  

Josh Meyer, Feds 'Chomping at the Bit' to Use Panama Papers to Catch Criminals (NBCNews 4/10/16), here.  Here are excerpts from the article:

[US] Federal agents and prosecutors are "chomping at the bit" to exploit the Panama Papers and launch prosecutions, a senior federal law enforcement official told NBC News -- but want to be sure that the way the huge data dump about offshore money was obtained doesn't jeopardize their cases. 

"It is a bonanza," the official said in reference to the cache of 11 million financial documents about shell companies that a Panamanian law firm set up for some of the world's shadiest and most powerful people. 

* * * * 

But first the feds need to figure out the best way to use the documents without running afoul of a complicated thicket of laws, especially the attorney-client privilege that law firm Mossack Fonseca has used to protect its thousands of clients from public scrutiny over the past four decades. 

Authorities run the risk of having prosecutions thrown out, and investigations quashed, if the underlying information is found to have been improperly obtained. One key question, according to the U.S. official and others, is whether the documents were hacked or otherwise illegally obtained from Mossack Fonseca. 

* * * * 

U.S. officials believe they won't have trouble getting access to the Panama Papers, especially as there are indications that at least some of the documents will be released publicly in a few weeks. 

And they are confident that they will be able to use many of the documents by claiming Mossack Fonseca knew or should have known that particular clients were engaged in illegal activity, citing "know your client" financial transparency laws in the U.S. and internationally. 

In the meantime, another key step will be for the Justice Department to prepare a "clean team" that would vet the documents before introducing them into investigations and open cases where they might run the risk of tainting them.

 Panama Papers: PM sets up anti-tax dodging task force (BBC 4/10/16), here.

The [UK] government is to set up a new task force to investigate allegations of tax-dodging and money laundering in light of the Panama Papers leak. 

The unit will be led by HM Revenue and Customs and the National Crime Agency.
It will also include specialists from the Serious Fraud Office and the Financial Conduct Authority. 

It was announced by Prime Minister David Cameron as he released details of his tax returns in an effort to defuse a row over his financial affairs. 

The move is also being seen as an effort by Mr Cameron to regain the initiative on the issue of tax avoidance, after attention focused on his own involvement with his late father's offshore fund, Blairmore Holdings.

Periodic Posting of Articles on ICIJ's Panama Papers and Ramifications (4/9/16)

There are so many news articles on the ICIJ's Panama Papers and their ramifications that I have decided just periodically (mostly daily) post an aggregation of the news articles or other content on the web that I think may be useful to readers.  Readers should remember that I do not look at all that web content, so there may be good content that I miss.  I urge readers aware of content that I missed to post the missed items as content or email the missed items to me at jack@tjtaxlaw.com.

First, the Wikipedia offering on the Panama Papers is here.  I presume that it will be regularly updated and could be a good source of information.  Readers interested in the issue probably should check it from time to time.

Also, Wikipedia offers a list of people named in the Panama Papers, here.

Now, here are today's offerings:

Billionaire Reading Name In Panama Papers Totally Forgot He Even Had Funds In Seychelles (TheOnion 4/7/16), here.  Noting that the billionaire, Frederick Weldon, claims to have forgotten about funds stashed in the Seychelles.  Except:

“Oh, yeah, right—jeez, forgot about that,” said Weldon, who after thinking about it for several moments, began to recall having his attorney at one point set up a tax-free dummy corporation in the island nation off the coast of Africa to harbor a portion of his assets. “Wow, I haven’t thought about that in years. How much was it again? $30 million? $40 million? Anyway, I’m glad they reminded me. Who knows how long that would have slipped my mind.” Weldon added that, just to be on the safe side, he’d better make some calls to Switzerland, Luxembourg, Hong Kong, Singapore, Bermuda, Mauritius, Macau, and the Isle of Man to make sure he wasn’t missing any other funds he had stored away.

[Note to readers 4/12/16 1:24pm:  A reader made a comment below that the Onion is a parody news site.  I should have caught that.  So read the above offering as parody.  Had I realized that before posting, I would not have posted, but having posted, I thought I would leave it up.] 

John Letzing, Swiss Banks at Risk of Harboring Corruption Proceeds, Says Regulator (WSJ 4/7/19), here.  Excerpts:

Mark Branson, chief executive of the Swiss Financial Market Supervisory Authority, or Finma, noted in public remarks Thursday that Swiss wealth managers are “increasingly accepting money from faraway, previously less-familiar markets.” That, he said, shifts the danger for Swiss banks “away from risks connected with tax law towards money laundering risks.” 

“It is often more difficult to determine the origin of money from developing countries,” Mr. Branson said. 

* * * * 

“We need a culture in which bank employees feel personally committed to combating money laundering,” Mr. Branson said. 

More Swiss banks need to be proactive about reporting suspicious activity, he said, with 18% of such reports based on the bank’s internal suspicions, while 28% are “in response to a newspaper article.”

Ralph Atkins, Swiss banks warned of exposure to EM money laundering (FT 4/7/16), here.  I do not post excerpts because FT requests that links to the article be given instead of cutting and pasting.  I will note that the article is more detailed than the WSJ article above and does have some good information.  Readers may be required to have a subscription.

Luke Harding, The fallout from Panama Papers revelations so far, country by country (Guardian 4/8/16), here.  Good country by country update for Russia, Azerbaijan, Iceland, UK, China, Zimbabwe, Iran, Australia, Panama, Pakistan, Argentina and Syria.

ICIJ Panama Report on Offshore Financial and Enabler Skulduggery (4/4/16; 4/5/16)

The International Consortium of Investigative Journalists ("ICIJ"), here, has another blockbuster release titled Giant Leak of Offshore Financial Records Exposes Global Array of Crime and Corruption (4/3/16), here.  The focus this time seems to be on the nontax side of offshore secrecy.  The article mentions some rich, famous and notorious players of the game.  I excerpt certain key parts that caught my attention (without dwelling on the players other than the major Panamanian law firm discussed):

In this story

• Files reveal the offshore holdings of 140 politicians and public officials from around the world 
• Current and former world leaders in the data include prime ministers of Iceland and Pakistan, the president of Ukraine, and the king of Saudi Arabia
• More than 214,000 offshore entities appear in the leak, connected to people in more than 200 countries and territories
• Major banks have driven the creation of hard-to-trace companies in offshore havens

* * * * 

The cache of 11.5 million records shows how a global industry of law firms and big banks sells financial secrecy to politicians, fraudsters and drug traffickers as well as billionaires, celebrities and sports stars. 

* * * * 

“These findings show how deeply ingrained harmful practices and criminality are in the offshore world,” said Gabriel Zucman, an economist at the University of California, Berkeley and author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” Zucman, who was briefed on the media partners’ investigation, said the release of the leaked documents should prompt governments to seek “concrete sanctions” against jurisdictions and institutions that peddle offshore secrecy. 

* * * * 

Most of the services the offshore industry provides are legal if used by the law abiding. But the documents show that banks, law firms and other offshore players have often failed to follow legal requirements that they make sure their clients are not involved in criminal enterprises, tax dodging or political corruption. In some instances, the files show, offshore middlemen have protected themselves and their clients by concealing suspect transactions or manipulating official records. 

* * * * 

The documents make it clear that major banks are big drivers behind the creation of hard-to-trace companies in the British Virgin Islands, Panama and other offshore havens. The files list nearly 15,600 paper companies that banks set up for clients who want keep their finances under wraps, including thousands created by international giants UBS and HSBC. 

* * * *

Interview of Acting Assistant Attorney General Ciraolo on Tax Enforcement (3/23/16)

The New York Law Journal has published this article of an interview of Acting AAG Caroline Ciraolo.  Jeremy H. Temkin, DOJ Tax Division Today: Interview With Acting Assistant Attorney General, 255 NYLJ No. 55 (3/23/16), here.  The interview is a general overview of the Tax Division's work, with particular focus on offshore accounts that have been perhaps its most visible effort over the past few years.  Of course, there is the expected claims of great success on the offshore efforts starting in 2009, with many prosecutions of individuals and financial institutions and much revenue gathered.

I focus in the balance of this blog only on matters that I found particularly interesting.

1.  Regarding follow-through, Ciarolo says that DOJ  and the IRS are following leads they have obtained in the various efforts and are continuing to obtain from various sources "to identify and investigate U.S. accountholders who willfully concealed their foreign accounts and evaded U.S. tax, as well as those entities and individuals, foreign and domestic, that facilitated this criminal conduct."

2.  Category 3 and 4 information:

Finally, Tax Division attorneys and IRS personnel are reviewing the information received from Swiss banks that fall under Category 3 and Category 4 of the program. Category 3 and 4 banks maintain that they did not commit any violations of U.S. law, and seek a non-target letter after providing information required by the program.

I have written before that I am baffled that any Swiss Financial Institution would have proceeded under Category 3 or 4.  See US DOJ Swiss Bank Program Categories 3 and 4 Comments (Federal Tax Crimes Blog 2/4/16; 2/7/16), here.  Certainly, though, the Financial Institutions that did join under Categories 3 or 4 would have expected to have been closely scrutinized.

3.  Countries Other than Switzerland:

Tax Justice Network Study of Financial Secrecy with U.S. Third Most Opaque (11/14/15)

The Tax Justice Network, an independent network providing "high-level research, analysis and advocacy in the area of international tax and the international aspects of financial regulation."  The Tax Justice Network's description of itself from the web site is here.  The Tax Justice Network has a "financial secrecy index," here, which "ranks jurisdictions according to their secrecy and the scale of their offshore finanical activities. A politically neutral ranking, it is a tool for understanding global financial secrecy, tax havens or secrecy jurisdictions, and illicit financial flows or capital flight."

The index seeks to analyze features moving and hiding money offshore, with distortion in tax and economic systems.  The index general conclusions from the Introduction are summarized here :

Shining light into dark places 

An estimated $21 to $32 trillion of private financial wealth is located, untaxed or lightly taxed, in secrecy jurisdictions around the world. Secrecy jurisdictions - a term we often use as an alternative to the more widely used term tax havens - use secrecy to attract illicit and illegitimate or abusive financial flows.  

Illicit cross-border financial flows have been estimated at $1-1.6 trillion per year: dwarfing the US$135 billion or so in global foreign aid. Since the 1970s African countries alone have lost over $1 trillion in capital flight, while combined external debts are less than $200 billion. So Africa is a major net creditor to the world - but its assets are in the hands of a wealthy élites, protected by offshore secrecy; while the debts are shouldered by broad African populations.  

Yet all rich countries suffer too. For example, European countries like Greece, Italy and Portugal have been brought to their partly knees by decades of tax evasion and state looting via offshore secrecy.   

A global industry has developed involving the world's biggest banks, law practices, accounting firms and specialist providers who design and market secretive offshore structures for  their tax- and law-dodging clients. 'Competition' between jurisdictions to provide secrecy facilities has, particularly since the era of financial globalisation really took off in the 1980s, become a central feature of global financial markets. 

The problems go far beyond tax. In providing secrecy, the offshore world corrupts and distorts markets and investments, shaping them in ways that have nothing to do with efficiency. The secrecy world creates a criminogenic hothouse for multiple evils including fraud, tax cheating, escape from financial regulations, embezzlement, insider dealing, bribery, money laundering, and plenty more. It provides multiple ways for insiders to extract wealth at the expense of societies, creating political impunity and undermining the healthy 'no taxation without representation' bargain that has underpinned the growth of accountable modern nation states. Many poorer countries, deprived of tax and haemorrhaging capital into secrecy jurisdictions, rely on foreign aid handouts. 

This hurts citizens of rich and poor countries alike.  

What is the significance of this index?