Hong Kong the New Money Laundering Destination?
As whistleblower lawyers who concentrate in bank fraud cases, we get lots of question about the legality of bringing money into or out of the United States. Like many countries, the United States does not have currency controls per se but U.S. Treasury Department regulations require cash in excess of $10,000 be reported. That includes entering or leaving with foreign currency if the amounts exceed the equivalent value of $10,000 as measured in U.S dollars.
In recent years, most countries have become concerned with money laundering. Large amounts of cash can be used to evade taxes, finance terrorists or launder money for drug cartels.
In a surprise move, earlier this year Hong Kong rejected a proposal that would have required reporting by people entering the country with more than HK$120,000. A government anti-money laundering task force suggested a reporting threshold of HK$160,000 (about $15,000 USD).
In rejecting the proposal, one legislator said, “I wonder if anyone would launder money by carrying a huge amount of cash from one place to another.”
A trade group representative claimed that HK$120,000 “is not even enough to buy a watch.”
Clearly, legislators and merchants are encouraging wealthy Chinese from the mainland to come to Hong Kong and shop. The lack of currency reporting controls, however, will also encourage money launderers and those hoping to evade taxes.
As to the latter, if those would-be tax evaders are American, they must first figure out a way to get the cash out of the U.S. With TSA screening most international luggage, leaving the country with a suitcase full of undeclared cash will land you in hot water (maybe jail).
The same can be said for those that hope Hong Kong won’t honor its obligations under FATCA. The U.S. Department of Treasury and Hong Kong signed a FATCA intergovernmental agreement in November of 2014. The IRS has also now stationed agents in Hong Kong.
While the Chinese have a checkered reputation for honoring and enforcing treaties, China has its own concerns about tax evasion and money laundering. Because China and the US have some of the same interests on this issue, we expect that Hong Kong banks will honor their FATCA reporting obligations.
Just weeks after lawmakers in Hong Kong voted not to impose currency reporting requirements on money coming in to the country, one “asset protection” promoter began advertising how it was “legal” to bring unlimited amounts of cash into Hong Kong and without any government reporting. While that statement may be technically accurate as to Hong Kong authorities, U.S. law and FATCA bank reporting requirements say those sums must still be reported to Uncle Sam and by Hong Kong banks.
The lessons here are twofold. First, much of the asset protection advice promoted on the Internet is useless. Trying to hide money from Uncle Sam is a felony.
The second lesson is that currency reporting laws can be imposed both by the jurisdiction where travel begins and also by the final destination. Because Hong Kong may not require money to be declared when entering the country doesn’t mean that Uncle Sam can’t also enforce it’s currency reporting regulations.
Americans who evade IRS foreign reporting requirements are guilty of a crime. The civil penalties for failure to report foreign bank accounts or financial assets (brokerage accounts, cash value life insurance, etc) are huge. Very few Americans or foreigners holding green cards go to prison each year but the IRS does impose hundreds of millions of dollars in penalties.
If you have inside information about a U.S. company or individual evading taxes, you may be eligible for a cash whistleblower award. Our team of experienced whistleblower lawyers can help you stop tax evasion and collect the maximum awards possible.
For more information, visit our IRS Whistleblower Program information page or give us a call. All inquiries are protected by the attorney – client privilege and kept strictly confidential. For more information, contact attorney Brian Mahany at or by telephone at (414) 704-6731.
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