Cyprus, the Seychelles, and Saint Vincent and the Grenadines are beautiful, lush destinations. They are also reputed tax havens where the ultra rich can stash cash and hide the proceeds of illegal money laundering and tax evasion. There are more tax havens than these three countries, of course. By examining the indictments of Trump supporters and Rick Gates and Paul Manafort and the alleged connections to these popular tax havens, one can see many emerging whistleblower opportunities.
Special Prosecutor Robert Mueller claims that Manafort and Gates used shell companies in Cyprus, the Seychelles and Saint Vincent and the Grenadines to evade taxes.
Last week’s indictment links a dozen alleged Manafort shell companies to the island nation of Cyprus. The country has been under pressure since the 1990’s to strengthen its anti money laundering efforts. Little was done, however, until 2012 / 2013. Those were the years when the Cypriot banking industry collapsed and the country pleaded with the European Union for a bailout.
Many European countries were skeptical that any bailout moneys would flow directly to Russia. The Russians have several banks on Cyprus soil and many believe that those banks help launder money for wealthy Russians.
We weren’t surprised when last week’s indictment mentioned Manafort’s alleged ties to Cyprus. Our own search of the International Consortium of Investigative Journalists
(ICIJ) Panama Papers database showed links between several claimed Manafort front companies and Russian banks based in Cyprus.
The indictment claims both men used shell companies to obtain offshore bank accounts. The indictment says that once the accounts were created in the shell company’s name, Manafort and Gates pushed $75 million through the accounts. Were they committing tax evasion? Both men pleaded not guilty meaning the case will likely go to a jury.
The Manafort and Gates cases drew international attention because of Trump’s ties to his former campaign manager, Paul Manafort. That the person prosecuting the case is he special prosecutor looking into Russian ties to the Presidential campaign adds even more sensationalism is to the case.
Admittedly, the Manafort case has become a political circus. Most unreported offshore accounts result in civil prosecutions by the IRS. Under the Internal Revenue Code, the penalties for failing to report an offshore account are as much as 50% of the account value and those penalties are for each year the account was unreported. They are the highest penalties in the IRS arsenal.
Hopefully the Gates and Manafort prosecutions will shine some light on the huge problem of using offshore accounts to commit tax evasion.
Opening an account in Cyprus, the Seychelles or Saint Vincent and the Grenadines isn’t illegal. In fact, if you were an American ex pat retired in one of these countries that might make perfect sense. Very few Americans actually live in these small island nations, however.
So why open an account in one of these countries.
For many people, it is the hope that Uncle Sam or other regulators won’t find it. That is why all three of these countries are considered tax havens. Others open accounts there to hide assets during a divorce or from creditors or to conceal their illegal activities.
To understand why people hide money offshore, we need to first understand why these countries are called tax havens.
What is a tax haven? We call any country that helps depositors conceal their identities and helps shell companies avoid disclosing officers and directors a tax haven. (As to the latter, some would call Delaware or Wyoming tax havens as they don’t require much disclosure from those seeking to incorporate there.)
It’s not just a country’s laws that define a tax haven. Some countries pay lip service to international pressure and enact disclosure laws but then do little to enforce those laws.
Before the Panama Papers were released by the ICIJ, the consortium labeled the Seychelles a “corruption-haunted archipelago” and “an offshore magnet for money launderers and tax dodgers.” Some say that Saint Vincent and the Grenadines are even worse!
Coupled with other so-called tax havens (Monaco, the Caymans, Isle of Man), experts believe that between $7 and $30 trillion dollars ($30,000,000,000,000.00) is hidden in these countries. That is a large percentage of the world’s wealth all concentrated on a few tiny countries. All that unreported cash means that there is likely hundreds of billions of dollars in unreported taxes. You and I struggle to pay our taxes while some super wealthy pay nothing.
Unfortunately, money talks. That means that even if one of these tax havens promises to be more transparent, we suspect that the governments of these countries will always be beholden to the banks and bankers.
Suspected hackers are what ultimately resulted in the most recent mass disclosure of financial records. That database was published by the ICIJ and contains highly personal financial records belonging to a “wealth management” and “asset protection” law firm, Appleby.
With offices conveniently located in several notorious tax havens, we suspect there are many sleepless Americans tonight. Those folks being Appleby’s U.S. clients who now must struggle with their dirty laundry being exposed for all to see.
Call for Offshore Tax Haven Whistleblowers
No matter where you live, if you are a U.S citizen, resident or green card holder, Uncle Sam requires you to annually disclose your interest in most offshore financial accounts. This includes cash value life insurance, CDs, bank accounts, securities accounts and the like. Failing to report is a felony and carries massive civil penalties. Those penalties can be up to 50% of the account’s value and can be imposed yearly!
For whistleblowers, reporting people with large unreported accounts or those that help set them up may make you eligible for a large cash awards.
Seeking More Information on Money Laundering in the Seychelles
We are especially interested in speaking with individuals who have knowledge of unreported accounts in Cyprus, the Seychelles, the Caymans, Isle of Man, Switzerland, Israel, Monaco, Liechtenstein, St. Vincent and other reputed tax havens.
The Seychelles especially concerns us because of concerns that the countries banks and offshore service companies may involved with trafficking in so-called blood diamonds from Zimbabwe. That means that they may be assisting war lords and others in spreading human suffering and misery.
In addition to the Seychelles, we are also investigating a claim of middle eastern banks helping traffickers of blood diamonds launder money.
For a country with just 117 square miles of territory and less than 100,000 people, the country’s banks reportedly hold hundreds of billions of dollars. Why would wealthy Americans bank in a tiny African archipelago? It certainly isn’t because they give away free toasters!
Award Programs for Offshore Whistleblowers
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 – FIRREA for short – pays cash awards of up to $1.6 million for information about banks engaged in fraudulent activity. Whistleblowers who report banks that help facilitate money laundering or tax evasion may qualify. (Maximum awards are common!)
The IRS Whistleblower Program pays awards to people who have inside information about unreported offshore accounts or tax evasion. Unlike FIRREA, there are no caps on awards. In fact, the largest IRS award to date was given to a former UBS director who turned over information about a scheme by the bank to help Americans hide money in Swiss accounts. That whistleblower received over $100,000,000.00
The Foreign Corrupt Practices Act – FCPA – may also come into play. That law makes prohibits US companies or foreign companies that sell securities here to bribe foreign government officials. Some industries like mining and the oil and gas industry are notorious for paying bribes to speed along permits or bypass environmental regulations.
And how do these companies pay the bribes? Usually through an offshore account. It is hard for both auditors and regulators to audit an account that they don’t even know exists.
Have Information about Unreported Offshore Accounts / Shell Companies?
If you have information about unreported foreign bank accounts, suspicious foreign shell companies, or money laundering, here are several things to consider.
First, awards are paid to people with inside information. The Panama Papers and Appleby records may be loaded with all kinds of gems but you are going to likely need more. Why? If you read it form a website, you are not considered the “original source.” In other words, it is no longer inside information.
Second, awards are generally paid to the person who first reports the information. Wait too long and somebody may beat you and collect the award.
Third, all three whistleblower programs are open to people regardless of their residency or citizenship. Some of the best whistleblower awards have been paid to compliance officers located outside the United States.
Please remember that databases such as the Panama Papers can be useful but to use them successfully, you would need something more than what you found online.
For tax evasion cases, the ideal whistleblower may be the someone who works for a bank, corporate IT department or a compliance officer.
Ready to learn more? Call us for a free, no obligation consultation. We love what we do and are always eager to help others. For more information, contact us online or Attorney Brian Mahany directly at (direct). See also our FIRREA Bank Fraud, IRS and SEC Foreign Bribery information pages.
All inquiries are protected by the attorney – client privilege and always kept completely confidential.
[See also our recent related post on the Appleby hack.]