UK Prime Minister David Cameron has told the Crown Dependencies to improve measures to provide information about the beneficial ownership of corporations, trusts and other nominee entities.
The Crown Dependencies are countries that still have limited political ties to Great Britain and the British crown. They include Jersey, the Isle of Man, Guernsey as well as the Cayman Islands, Montserrat, the Turks and Caicos Islands, Gibraltar and the British Virgin Islands. It is not without coincidence that many of these countries are considered tax havens.
The United States, the United Kingdom, the G20 group of nations and the OECD have all pledged to crack down on tax evasion using offshore accounts and to increase financial transparency. One of the biggest impediments, however, has been the use of nominee accounts.
A nominee account is a bank account opened in a fictitious name or in the name of a corporation, trust or other entity. Many folks engaged in tax evasion use pseudonyms or create offshore constructs making it difficult for tax authorities to determine the beneficial ownership of those entities.
In the United States, the use of nominee account names isn’t illegal but the IRS considers their use an affirmative act of tax evasion if there is no valid business reason for using a nominee accounts. Similarly, creating complex constellations of offshore companies owned by other offshore entities without a reason also concerns the government.
Last year, several countries agreed that more had to be done to establish better transparency. One of the recommendations was a beneficial ownership registry available to tax authorities. (Although many governments have criticized the so-called secrecy and tax haven jurisdictions for not making beneficial ownership available, one of the biggest offenders is the United States.)
Several countries including the Isle of Man are already working on beneficial ownership registries but it appears that any global effort is still years off. Until that happens, the IRS and other taxing agencies struggle to determine the ownership of foreign accounts. Lest one think its a good strategy, however, many of the recent indictments from the U.S. Justice Department for FBAR violations and tax evasion have involved nominee accounts.
The author, Brian Mahany is a tax lawyer concentrating in FATCA, FBARs and foreign income reporting. For more information, contact the author at or by telephone at (414) 223-0464. All inquiries held in strict confidence and covered by the attorney – client privilege.