Panama Papers Spark US Criminal Tax Evasion Probe

Law360, New York (April 20, 2016, 2:36 PM ET) — The U.S. Department of Justice has launched a criminal investigation into the international tax avoidance schemes exposed by the Panama Papers leak, the International Consortium of Investigative Journalists confirmed Wednesday.
The ICIJ, which had obtained 11.5 million previously secret documents from Panamanian law firm Mossack Fonseca & Co. earlier this month, confirmed that U.S. Attorney Preet Bharara for the Southern District of New York had written the consortium to request its help with an investigation “regarding matters to which the Panama Papers are relevant.” The Guardian published the letter on its website.
Bharara is looking to speak with any ICIJ representative involved in the consortium’s Panama Papers project, the letter said. The DOJ declined to comment on the matter Wednesday.
Meanwhile, with several European Union member states, Panama and the U.S. Department of the Treasury making moves against tax evasion, U.S. Rep. Carolyn B. Maloney, D-N.Y., urged the House Financial Services Committee on Wednesday to conduct a hearing on a bill she introduced in February that would crack down on the use of anonymous shell companies.
“The use of anonymous shell companies is not limited to Panama or offshore tax havens — the U.S. is one of the easiest countries in the world in which to set up such shell companies because U.S. states do not require disclosure of shell companies’ true owners at the time of incorporation,” Maloney said in her letter Wednesday to committee Chairman Jeb Hensarling, R-Texas. “This allows criminals and corrupt officials to set up shell companies in the U.S. in which they are the beneficial owner, but their link to the company is hidden behind a wall of secrecy.”
Her bill, H.R. 4450, which has not moved from the committee since it was introduced, would require corporations and limited liability companies to disclose their beneficial owners, information that would provide law enforcement with “a much-needed tool” to fight corruption. If individual states are not already collecting such information, the bill would require the Treasury to do so as a backup, Maloney said.
The Panama Papers revealed more than 200,000 offshore entities connected to people in more than 200 counties, including those set up for at least 33 people and companies that have been blacklisted by the U.S. government, Maloney said.
Once a company is blacklisted, shell companies are one of the only ways for them to effectively move their money around the world — money that is often associated with corruption, drug trafficking and terrorism, she added.
On Saturday, Treasury Secretary Jacob Lew had said that his agency would soon propose regulations to clamp down on tax evasion by requiring more transparency about the ownership of limited liability companies by requiring beneficial owners to identify themselves to the IRS. The Treasury will also soon finalize rules proposed in 2014 that would require financial institutions to identify real people behind otherwise anonymous companies, Lew said.
Last week, Germany, the U.K., France, Italy and Spain had agreed to automatically exchange information on company ownership and offshore trusts, to fight corporate tax evasion, while Panama reversed course and said it would comply with international tax reporting standards.
The European Parliament has also moved to investigate the offshore shell companies set up by wealthy individuals.
–Additional reporting by Eric Kroh, Evan Weinberger and Vidya Kauri. Editing by Edrienne Su.

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