New front in US war on tax evasion

NEW YORK • Lawyer Patrick Poulin says he helped clients set up offshore corporations in the Caribbean. And that was what he was working on when he flew to Miami from the Turks and Caicos islands last year to meet two Americans who wanted him to invest US$2 million (S$2.8 million) from a real estate deal.

Instead, they arrested him at the airport. The clients, who went by "Bob" and "Abraham", said the lawyer, were really federal agents targeting him as part of a money laundering sting.

The arrest comes amid a campaign by US prosecutors to pursue suspect foreign incorporators in countries where corporate secrecy laws and the demands of extradition have stifled investigative efforts. The strategy: Lure service providers out of overseas havens to the United States with aggressive methods like undercover operations, wiretaps and stings, case filings show.

More than 50,000 US taxpayers have avoided charges since 2009 in the offshore tax evasion crackdown; the programme required them to disclose which banks and advisers helped them hide assets, according to the US Internal Revenue Service.

This new front in the long-running battle against money laundering is part of a broader US crackdown on tax evasion. Taxpayers seeking amnesty under Internal Revenue Service (IRS) disclosure programmes are snitching on the incorporators, as well as naming Swiss banks and the bankers who aided them.

More than 50,000 US taxpayers have avoided charges since 2009 in the offshore tax evasion crackdown; the programme required them to disclose which banks and advisers helped them hide assets, according to the IRS.

The aggressive strategies are likely meant to tell incorporators that they are being watched, said former federal prosecutor Jeffrey Neiman, who worked on the ground-breaking 2009 tax evasion case against UBS Group AG.

"It plants the seed around the world that, just maybe, the government is listening to this conversation," he said.

By luring incorporators to the US to make an arrest, the authorities avoid often-complicated and lengthy extradition battles, Mr Neiman said. About 30 Swiss advisers, for example, have been indicted in the US since 2008.

The crackdown comes as offshore tax shells proliferate. President Barack Obama said in 2009 that one Cayman Islands address had as many as 12,000 corporations registered to it. Bloomberg News found the number was closer to 19,000.

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A version of this article appeared in the print edition of The Straits Times on September 10, 2015, with the headline 'New front in US war on tax evasion'. Print Edition | Subscribe