This month marks the first time the US Justice Department has brought criminal charges against an individual for violating tax reporting requirements as established under FATCA (the Foreign Account Tax Compliance Act).
The landmark case arose after the owner of an overseas broker agency and investment management company located in Belize & Panama, pleaded guilty to counts of money laundering conspiracy. There had been evidence to suggest that he had been fraudulently manipulating the shares of over 50 US-based trading companies and then laundering up to a quarter of a million USD in profits using at least five vehicles disguised as offshore legal firms.
According to the prosecution, the defendants’ scheme was helping US clients to avoid their reporting requirements to the IRS by being able to hide their proceeds being generated by the manipulation of stock transactions via the shell companies and their nominees appropriately.
With the FATCA provisions only coming into ruling from July 2014, combined with the Justice Department’s reporting requirements showing no signs of stopping, this case is the first of many criminal prosecutions we are likely to see involving violations of FATCA’s provisions in future.