New York prosecutors brought charges for conspiracy and tax fraud against four men across the globe. One was a Massachusetts accountant arrested in Boston. Counts against him included wire fraud and willful failure to file a Report of Foreign Bank and Financial Accounts (FBAR).
These were the first U.S. indictments related to the leak of documents from Mossack Fonseca law offices in Panama (often called the Panama Papers). In London and Paris, arrests were made of an investment adviser and client, but an implicated Panamanian lawyer remains at large. German police also raided Deutsche Bank headquarters in Frankfurt on suspicion the bank helped launder money through offshore tax havens.
British Virgin Islands, Hong Kong and Panama
The complex schemes involved shell companies and undisclosed foreign account around the globe. Leaked documents implicated current and former world leaders in tax evasion.
An undercover American businessman helped with the Justice Department investigation. He introduced an undercover law enforcement officer to the German investment adviser. Even after the Panama Papers disclosure in April 2016, the German investment adviser offered help laundering money by faking losses to evade United States taxes.
Another red flag was that the adviser preferred talking over WhatsApp or Skype as more discreet than the telephone.
Account ownership and repatriating funds
The client arrested was a German citizen who lived in the United States. He failed to report or pay taxes on offshore account by claiming they belonged to his 102-year-old mother. Through various entities, he held millions in offshore accounts. The adviser would make payments from them to cover mortgage payments, artwork and hunting trips.
A story from “Client-1” detailed how the German adviser and Panamanian lawyer used accounts on the Isle of Man and Hong Kong to help evade income taxes. When the client brought up joining the amnesty program, they referred him to Boston accountant. Other advice included repatriating funds through a fictitious sale and advice about a variety of ways to continue concealing accounts.
The Offshore Voluntary Disclosure Program ended in September 2018, but options still exist to return to tax compliance.
Worldwide investigations continue to look for and prosecute those involved in schemes to evade taxes. And to be effective, voluntary disclosure must occur before a name comes up in an investigation.