Posts Tagged ‘Enforcement’

Credit Card Companies, Processors, Other Financial Intermediaries and Their Clients May Be Targeted for Tax Fraud and Failure to Have Robust Anti-Money Laundering Processes

April 16, 2009

It was reported in the New York Times today that the federal government is widening its investigation of offshore tax evasion to include services sold by the First Data Corporation (“FDC”), a large processor of credit card transactions.


The IRS has asked FDC to turn over account information on “scores of merchants that sell or provide offshore services, like financial transactions processing and to identify American clients who through credit cards, debit cards and other financial processing

arrangements may have diverted unreported income offshore or received unreported income from undisclosed offshore sources…”


While not mentioned in the article, I would assume Treasury, FinCEN and the IRS as well as the Department of Justice and the FBI and State Attorney General Offices will widen the scope of the investigation to banks, credit card companies and other financial processors and intermediaries who may be facilitating both tax fraud and money laundering by both American and non-American clients in many offshore tax havens.


I would expect a likely result of this investigation will be front page civil and criminal enforcement of both tax fraud and money laundering under the tax laws and the Bank Secrecy Act as well as new  regulations which will impose robust reporting standards on these companies (e.g., SARs, CTRs, Tax reporting documentation, etc), as well as to require senior officers at these companies to certify that they have anti-money laundering and tax reporting processes in place together with other internal controls necessary to prevent tax evasion, money laundering and fraud by their clients.