Sun | Oct 22, 2017

Court authorises IRS to scope out Belize offshore bank accounts

Published:Friday | September 18, 2015 | 12:00 AM

A United States federal court in Miami has given its authorisation to the Internal Revenue Service (IRS) for a 'John Doe' summons seeking information about US taxpayers who may hold offshore accounts at Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL).

The US Department of Justice said Wednesday that the order, which was entered by US District Judge Ursula Ungaro, granted the petition for permission to seek records of BBIL's and BBL's correspondent accounts at Bank of America NA and Citibank NA.

Those records will allow the IRS to identify US taxpayers who hold or held interests in financial accounts at BBIL and BBL, as well as other financial institutions that used the same correspondent accounts, the Justice Department said. A correspondent account is a bank account that one bank maintains for another bank.

"The department and the IRS are using every tool available to identify and investigate those individuals determined to evade their US tax and reporting obligations through the use of offshore financial accounts and foreign entities," said Acting Assistant Attorney General Caroline Ciraolo of the Justice Department's Tax Division.

"These John Doe summonses will provide detailed information about individuals using financial institutions in Belize and, to the extent funds were transferred, other jurisdictions. But rest assured, we are receiving information from many sources regarding hidden foreign accounts and offshore schemes," Ciraolo warned.

"The time to come clean is now - before we knock on your door."

IRS Commissioner John Koskinen said the court action "further demonstrates our relentless efforts to pursue and catch those evading taxes with hidden offshore accounts, no matter where they are or what structures are used to hide behind.

"This court action also reinforces the ongoing importance of the John Doe summons in international tax enforcement," he said.

According to the IRS declaration, BBL is incorporated and based in Belize, and directly owns BBIL.

The IRS declaration also names Belize Corporate Services (BCS) as incorporated and based in Belize and offering corporate services, including the purchase of "shelf" Belizean international business companies. Shelf companies typically have no activity.

BBL, BBIL and BCS are all corporate subsidiaries of BCB Holdings Limited, according to the declaration.

"The customers in the 'John Doe' class may have failed to report income, evaded income taxes, or otherwise violated the internal revenue laws of the United States," the declaration says.

John Doe summonses are used to obtain information about possible violations of internal revenue laws by persons whose identities are unknown.

The summonses approved on Wednesday direct Citibank and Bank of America to produce records identifying US taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or their affiliates, including other foreign banks that used BBIL and BBL's correspondent accounts to service US clients.

The court also granted the IRS permission to seek records related to Citibank's and Bank of America's correspondent accounts for BCS and information related to BCS's deposit accounts at Bank of America, the Justice Department said.

"Financial transactions involving US dollars flow through US banks; therefore, foreign banks that do business in US dollars, but do not have an office in the United States, obtain a correspondent account in order to reach US customers," the Justice Department said.

"Transactions in the correspondent account leave a trail in the United States that the IRS can follow, including by using a John Doe summons," it added. "The John Doe summons can let the IRS obtain records of money deposited, paid out through cheques, and moved through the correspondent account through wire transfers."

The Justice Department said US federal tax law requires US taxpayers to pay taxes on all income earned worldwide.

US taxpayers must also report foreign financial accounts if the total value of the accounts exceeds US$10,000 at any time during the calendar year, the Justice Department said.

It said wilful failure to report a foreign account can result in a fine of up to 50 per cent of the amount in the account at the time of the violation.