More On IRS Sting Operation in the Recent Indictments (4/5/14)

I recently reported on indictments arising from an IRS sting operation on offshore accounts in tax haven jurisdiction other than Switzerland.  See IRS Sting Investigation Nabs Offshore Bank Account Enablers (3/24/14), here.  Rounding out that story for now is the following article:  Laura Saunders, Offshore accounts: the next target (WSJ Marketwatch 4/4/14), here.  Here some excerpts (with bold face added by JAT to draw your attention to things I think particularly important):

This past week, an official at the Justice Department said the sting should serve as a warning about offshore accounts. 

“The Cayman case illustrates that we have ways of getting information that people don’t know about,” Assistant Attorney General Kathryn Keneally of the department’s Tax Division said at a news conference in New York. “The days of waiting for a warning sign, such as a letter from a bank, are over.” 

Keneally said that the government receives account information from many sources, including whistleblowers hoping for monetary rewards. She declined to comment on whether U.S. officials have the names of Americans who hold accounts in the Caymans or elsewhere in the Caribbean as a result of this probe. 

Taxpayers are ineligible to participate in the IRS’s limited-amnesty program for undeclared offshore accounts if U.S. authorities already have their names. The program imposes steep penalties but offers protection against criminal prosecution.
Experts believe U.S. authorities do have names of account holders in the Caymans.
“Announcements by the government about this case suggest it already has customer lists, although officials can’t confirm it,” says Bryan Skarlatos, a lawyer at Kostelanetz & Fink in New York, which has handled more than a thousand confessions by U.S. taxpayers with offshore accounts. 

* * * * 

In March of last year, the indictment says, three undercover IRS agents met with St-Cyr and VanDyk in Miami. One of the agents represented himself as a U.S. citizen who wanted to launder $2 million. 

To show how the scheme worked, Poulin, VanDyk and St-Cyr arranged several transfers of $200,000, the indictment alleges. 

In December, the funds were wired from a Virginia account to an account at Poulin’s law firm in the Turks and Caicos, according to the indictment. The $200,000 was then moved to an account in the Cayman Islands, and most of it was returned to the U.S. in February. 

Poulin allegedly told the IRS agents that most of his clients were Canadian or American. The entire $2 million was intended to be concealed, in part by using a foundation named Zero Exposure in the Turks and Caicos. 

St-Cyr and VanDyk allegedly said that they charged clients more to launder criminal proceeds than to assist in tax evasion, according to the indictment. They also said a foundation was preferred for laundering criminal proceeds, while a trust was sufficient to conceal tax evasion.

This sting operation appears similar to one involved in the Aegis criminal investigation.  I have previously blogged on some of the criminal prosecutions arising out of that investigation.  See here.  That operation involved shunting untaxed money to offshore entities as the means to evade U.S. tax.  IRS agents participating in either an IRS investigation or a grand jury investigation attended promotional meetings outside the U.S. and then did sting operations on U.S. persons (such as return preparers who enabled the evasion, either willingly or unintentionally).  This is the first time I am aware that the IRS had done a sting operation in the current round of offshore initiatives commencing with UBS in 2009, but I suspect that there are others that have been commenced earlier and will be ongoing.  We will undoubtedly hear more later.