[Ed. note: This post is from guest blogger Daniel Stoica. Daniel is a business consultant and accountant located in Illinois. Space permitting, we invite others to submit articles as well that may be of interest to our readers.]
Offshore accounts are very popular with fraudulent investors and others who wish to limit the amount of taxes they pay to the US government. Although the task of finding offshore funds is often very difficult due to the fact that foreign banks are not obligated to disclose any information about their account holders, it is still possible to be caught and prosecuted.
Recently, a real estate investor stole over $5 million dollars from legitimate U.S. investors and fraudulently transferred the funds to seven different corporations. Each of these corporations was located in different countries and were owned and managed by a company in the Isle of Mann. One company owned a farm in Australia and yet another owned a tract of houses on Maui. In Florida, an expensive home was purchased by the fraudulent real estate investor where his brother would live, so the home could be held in a trust without the fraudulent investor’s name being attached to it. When the investor needed money, he would contact his management company and they would wire the money to the account of the fraudulent investor’s choice.
This type of activities happens on a fairly regular basis and is another reason why it can be difficult for the government to locate the money.
This fraudulent real estate investor literally vanished; moving from one country to another and having no paper trail. He had no property, no bank accounts and no credit cards in his name. He was said to be living at the farm in Australia and in one of the houses on Maui, but he kept moving. This man was married and much of the time, his wife was with him, but she used her maiden name on all of her identification. Since he, himself, did not hide his identity, the U.S. government found him via his passport and with the cooperation of the countries where his money was held. They had a legitimate case against him, but didn’t pursue extradition.
Even though the fraudulent investor’s money was found in offshore banks, those country’s secrecy laws didn’t allow the U.S. government to access any account information or if any of the stolen money had been withdrawn. The management company that the investor used became suspicious and believed the fraudulent investor could be laundering money, which was a crime in their country. The management company contacted its local law enforcement, who, in turn posted the investor’s information on a worldwide network that alerted law enforcement agencies across the globe. Several investigations were under way in several countries, with hundreds of agencies working together to find the stolen funds.
When the fraudulent real estate investor realised his hidden money had been found by law enforcement agencies worldwide, he came back to the United States under his own accord and cooperated with the government and his representative. All of the cash and real estate were recovered and, after the real estate was sold off, the money was returned to all of the victims who had money stolen from them by the fraudulent investor. He eventually pleaded guilty to United States security fraud, mail fraud and wire fraud. Today, he is serving time in a U.S. prison.
Finding stolen money and getting it back to its rightful owner isn’t always easy. However, the U.S. government is working diligently to bring these people, and the money they have stolen, back into the U.S. and back into the hands of the people who lost thousands, and sometimes even millions, of dollars.
In 2010, the Department of Treasury and the IRS announced the Foreign Account Tax Compliance Act (FATCA), which is a new law for the non-compliance of U.S. taxpayers with foreign accounts. The implementation of FATC, which will take effect in 2013, will aid in U.S. efforts to fight for compliance with offshore account holders.
It is not illegal to hold an account in an offshore account; however, you must be aware that you do have to pay taxes on the funds. When all is said and done, you cannot hide from the government and you cannot hide your money forever. At some point, it will be found. And although some people don’t get prosecuted for hiding stolen money in offshore accounts, don’t think for one minute that it can’t happen. Someone, somewhere, who you believe is trustworthy to you, will have a change of heart and will alert the authorities.
Hiding money is foreign accounts is risky business. The U.S. government is taking greater measures to find these accounts and recover the taxes that are owed.
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