From Switzerland to the Cayman Islands, the IRS continues the hunt.
As the IRS’ ‘’Swiss Bank Program’’ successfully concluded, officials took no time to enjoy the picturesque setting or some luge lessons.[1] Why would they? The IRS had already set their sights on another exotic locale, the Cayman Islands—also a favorite of Americans trying to hide their finances and assets from Uncle Sam. Yet, the IRS couldn’t just enjoy the sun and surf like most visiting the Caymans do; instead, it elicited two guilty pleas from Cayman financial firms admitting to conspiracy to evade taxes. In fact, just yesterday the Department of Justice announced that Cayman National Securities Ltd., and Cayman National Trust Co. Ltd, two Cayman Island affiliates of Cayman National Corporation, have plead guilty to hiding more than $130 million in offshore accounts from the IRS, from 2001 to 2011.[2] Critically, these guilty pleas represent the first convictions of a non-U.S. financial institution outside of Switzerland for conspiring with U.S. taxpayers to evade taxes.[3] The Cayman firms concealed U.S. taxpayer’s assets by opening accounts for clients in the name of sham Caymanian companies and trusts and allowed the U.S. owners to trade in U.S. securities. As part of the plea agreement, the Cayman financial institutions will pay the United States $6 million and will provide U.S. authorities with the files of up to 95% of their U.S. clients who sought to evade taxes.[4]
While the $6 million fine may seem small for the scope of the conspiracy, the IRS is most interested the Cayman firms’ files on U.S. taxpayers. As discussed last week, expatriate and former U.S. citizen Albert Cambata was prosecuted for tax evasion as a consequence of certain Swiss banks sharing their files with the IRS. Now that Cayman financial firms are meeting the same fate as their Swiss brethren, we can expect to see more individual U.S. taxpayers prosecuted for evading taxes through services of Cayman-based companies.
Indeed, in the DOJ’s press release, U.S. Attorney Bharara said, “we are committed to finding and prosecuting not only banks that help U.S. taxpayers evade taxes, but also individual taxpayers who find criminal ways not to pay their fair share. We will follow them no matter how far they go to hide their accounts, whether it is Switzerland, the Cayman Islands, or some other tax haven.”[5] Acting Deputy Assistant Attorney General Goldberg of the Justice Department’s Tax Division echoed this sentiment, saying, “our focus is not on any one bank, insurance company or asset management firm, or even any one country. The Department and IRS are following the money across the globe – there are no safe havens for U.S. citizens engaged in tax evasion or those actively assisting them.”[6]
With the recent successes of the IRS’ crackdown on offshore tax evasion, it is imperative that anyone with concealed international assets take the U.S. government at their word. The day may come where your offshore financial institution crumbles before IRS inquisition, leaving you exposed and uncertain whether, or when, an indictment may land on your doorstep.
–By Tony Nasser, Esq., Barnes Law
Tony Nasser is associated with Barnes Law, licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://www.justice.gov/opa/pr/justice-department-announces-final-swiss-bank-program-category-2-resolution-hszh-verwaltungs
[2] https://www.justice.gov/opa/pr/two-cayman-island-financial-institutions-plead-guilty-manhattan-federal-court-conspiring-hide
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] Ibid.