Tax

Abu Dhabi proposes 50 year zero tax zone?

A report in the Khaleej Times from 1st July on proposed regulation for the Abu Dhabi Global Market hides an interesting nugget, way down in paragraph six.

A palace overlooks Abu Dhabi Yacht Club - a high roller's playground?  Image: wavejourney.com

A palace overlooks Abu Dhabi Yacht Club – a high roller’s playground? Image: wavejourney.com

“Abu Dhabi financial zone will offer a zero-tax environment for 50 years. In the launch phase, the financial hub will benefit from Abu Dhabi’s natural strength, ie private banking, wealth management and asset management and will grow according to market demand to eventually become a broad based financial hub.”

Great news for private and corporate clients who want to take a break from paying taxes, but how does this sit with the rest of the world’s focus on tax crimes? Will parking funds in the ADGM and avoiding coughing up your dues in the place you make your money be OK? Time will tell.

Abu Dhabi is a part of the United Arab Emirates, a member of the Financial Action Task Force’s regional body – MENAFATF.

 

 

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US IRS agents pay a visit to Macau

Agents from the US Internal Revenue Service travelled to Macau – the favourite haunt of China’s avid gamblers – in May. Read this report from Brett Wolf at Reuters for an update.

Source: Reuters

Credit Suisse pleads guilty to criminal charges in US tax evasion settlement

Bank is first in more than a decade to admit to a crime in US and will pay more than $2.5bn in penalties

 

  • subverted disclosure requirements,
  • destroyed bank records, and
  • concealed transactions involving undeclared accounts

 

Credit Suisse Group has pleaded guilty to criminal charges that it helped Americans evade taxes, becoming the first bank in more than a decade to admit to a crime in the US. It will now pay a long-expected fine of $2.5bn (£1.5bn).

“This case shows that no financial institution no matter its size or global reach is above the law,” said the attorney general, Eric Holder. He said the years-long investigation had uncovered evidence of an “extensive and wide-ranging” conspiracy to hide taxes from the Internal Revenue Service (IRS) and the bank’s involvement in it.

“The bank went to elaborate lengths to shield itself, its employees, and the tax cheats it served from accountability for their criminal actions. They subverted disclosure requirements, destroyed bank records, and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds. They failed to take even the most basic steps to ensure compliance with tax laws,” said Holder.

Holder said the bank helped account holders deceive the IRS by concealing assets and income in illegal, undeclared bank accounts. “These secret offshore accounts were held in the names of sham entities and foundations. This conspiracy spanned decades. In the case of at least one wholly owned subsidiary, the practice of using sham entities to conceal funds began more than a century ago,” said Holder.

He said hundreds of Credit Suisse employees, including at the manager level, “conspired to help tax cheats dodge US taxes”.

Brady Dougan, Credit Suisse’s chief executive officer, said: “We deeply regret the past misconduct that led to this settlement. The US cross-border matter represented the most significant and longstanding regulatory and litigation issue for Credit Suisse. Having this matter fully resolved is an important step forward for us.

He said there had been “no material impact” on the bank’s business resulting from the heightened public attention and the bank would “now focus on the future and give our full attention to executing our strategy”.

The bank will pay a total of $1.8bn in the form of a fine of over $1.13bn and nearly $670m in restitution to the IRS. It will also pay the New York State department of financial services a record $715m and another $100m to the Federal Reserve.

The deal comes after a Senate panel in February concluded Credit Suisse recruited for over 22,000 US customers with assets of $10bn-$12bn, the vast majority of which were hidden from US authorities.

Pressure has been mounting on the Swiss banks in recent months. In March, Andreas Bachmann, one of six former Credit Suisse bankers indicted on charges of helping US clients hide $4bn in assets, pleaded guilty and agreed to cooperate with prosecutors.

In April, Josef Dorig, founder of a Swiss fund, pleaded guilty in the same case and implicated several other Credit Suisse bankers.

Criminal convictions against major financial institutions are rare. The financial services industry has worried that charging a bank with a crime could shut down its entire business. The last global bank to plead guilty in the US was Crédit Lyonnais, which in 2004 admitted making false statements to the Federal Reserve.

In 2002, the accounting firm Arthur Andersen was convicted of obstruction of justice related to its auditing of Enron, the energy firm that imploded in a massive accounting scandal in 2001. That ruling was reversed on appeal but was enough to destroy the company.

Regulators have subsequently been wary of criminal convictions of holding companies and have instead reached plea agreements with banks including HSBC, JPMorgan Chase and UBS or have extracted guilty pleas from subsidiaries.

Holder said the agreement had been struck “in close coordination with the bank’s financial regulators” because “criminal charges involving a financial institution have the potential to trigger serious follow-on actions by regulatory agencies.” He said the bank would now “move forward” although he said there were other ongoing investigations.

The case has led to calls for the resignation of Dougan and the chairman of Credit Suisse, Urs Rohner. Dougan, 54, is the first American to serve as sole CEO of Credit Suisse and was appointed to the top job in 2007 after leading the investment bank. He is one of the few global bank bosses to have survived the financial crisis and the scandals that followed.

On Sunday, Christoph Blocher, billionaire industrialist and vice-president of the rightwing Swiss People’s party (SVP), told Swiss newspaper Schweiz am Sonntag that Dougan and Rohner should step down. “In my opinion, the CEO as well as the chairman of the board must go in order to save the bank,” Blocher told the Schweiz am Sonntag. His comments come after calls for Dougan’s resignation from Switzerland’s left-wing Social Democrats.

While Credit Suisse is close to finalizing a deal, the Justice Department is still pushing for an admission of criminal wrongdoing from Italy’s BNP Paribas, which is accused of having violated US sanctions against Cuba, Iran and Sudan between 2002 and 2009.

 

Source: The Guardian

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Singapore inks FATCA agreement with US

SINGAPORE: Singapore has concluded discussions on a tax information sharing agreement with the United States that aims to prevent tax evasion by US citizens, FCA - American Eaglepermanent residents and entities.

Known as an Intergovernmental Agreement (IGA), the deal requires Singapore-based financial institutions to comply with the US Foreign Account Tax Compliance Act (FATCA).

FATCA, which is set to take effect on July 1, requires all financial institutions outside the US to regularly submit information on financial accounts held by US “persons” to the US Internal Revenue Service (IRS).

In a joint statement on Tuesday, the Ministry of Finance (MOF), Monetary Authority of Singapore (MAS) and the Inland Revenue Authority of Singapore (IRAS) said Singapore-based financial institutions will report information on financial accounts held by US account holders to the IRAS.

IRAS will then provide the information to the US IRS.

The joint statement added that “transmitting this information through IRAS helps to ease the compliance burden for our financial institutions as their reporting obligations would be deemed met once they have transmitted the information to IRAS.”

Singapore has initialled the IGA, and both sides are expected to sign the agreement in the second half of 2014.

Foreign financial institutions that do not comply with FATCA will face a 30 per cent withholding tax on certain payments made to them from the US.

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Pakistan identifies 26 tax crimes as ML predicate offences

FCA - Pakistan flagThe government of Pakistan is preparing a list of serious tax crimes to be declared as predicate offences under the Anti-Money Laundering Act 2010. A total of 26 offences have been outlined so far, connected to sales tax, income tax and federal excise duty. Making tax crimes predicate offences to money laundering is one of the Financial Action Task Force‘s 40 Recommendations as of 2012.

As of July 1 2013, tax crimes are predicate offences to money laundering in Singapore. The Monetary Authority of Singapore guided financial institutions to  ‘develop, implement and enforce internal policies, controls and procedures that effectively detect, and deter the laundering of proceeds from wilful or fraudulent tax evasion through the financial system.’

The new guidance placed enhanced due diligence requirements on all ‘clients assessed to present high risk of wilful or fraudulent tax evasion.’

In March 2013, the Private Banking Industry Group’s issued the Industry Sound Practices (see Addendum 1, p 29), to ‘safeguard the industry from being used as a platform to harbour proceeds from serious tax crimes, or as a conduit to disguise the flow of such funds.’

Among the firm’s responsibilities is to communicate that clients are responsible for their own tax obligations and assess the bona fides of clients, carefully evaluating the tax-related risks both when taking on a client and via continuous monitoring

Red flags for when to apply EDD to a client and account include:

  • Client requests for holdmail services without satisfactory reasons. Clients can ask a bank to receive correspondence relating to their account. The mail is held for them until they return to the jurisdiction. The service allows a level of privacy or secrecy which the Singapore governmnet n
  • Use of complex structures
  • Non-face-to-face business relationships
  • Negative tax-related reports from media or other credible information sources on the client or on client’s jurisdiction of domicile or tax residence
  • Any additional parameters that a Covered Entity considers pertinent for conducting its risk assessments and due diligence checks.

The Industry Sound Practices also includes a ‘non-exhaustive’ five step process for EDD, including screening adverse or negative news, questioning the source of funds, using information from other financial institutions where legally possible, identifying the beneficial owners.

This guidance was targeted to the private banking sector, some of whose clients have been used to evading taxes and may be less inclined to reveal more details about the source of their wealth as private banking is notoriously discreet and protective of its wealthy benefactors. There was some concern that clients who had traditionally banking in Singapore may begin to move funds to jurisdictions with less rigorous counter-tax crime regimes.

If any readers have seen changes within Singapore, or heard of a client exodus, do please drop me a line.

 

 

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Indian regulator homes in on round-tripping

 

Yachts in a tax haven quayside

Yachts in a tax haven quayside

Round tripping: routing money back into the country as foreign funds using investment vehicles, such as stocks and bonds, across jurisdictions  

The Securities and Exchange Board of India is reportedly looking into a money movement scheme which allows investors to bring money back into India without paying the correct amount of tax.

According to this report on moneycontrol.com, SEBI is “looking at the possible use of Protected Cell Companies (PCCs) from Mauritius, British Virgin Islands, Cayman Islands and Seychelles for alleged round-tripping of funds back into the capital market in the form of foreign institutional investor and overseas venture capital money.”

Several entities are under investigation, including some well known companies and industrialists, although no names have been confirmed. It also looks like bank employees may have been acting without the knowledge of the institutions to arrange ’round-trips’ for clients: “..while the banks may not have been directly involved, their employees may have dealt with the clients without keeping the banks in the loop.”

The problem is not jsut limited to India, unsurprisingly. A study carried out by professors at Massachusetts Institute of Technology (MIT) int he US revealed that the practice is costing the US billions in unpaid revenue.

 

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Seychelles’ New FSA To Regulate Offshore Financial Sector

On March 1, 2014, under The Financial Services Authority Act 2013, the Seychelles International Business Authority (SIBA) FCA - MAldiveschanged its name to the Financial Services Authority (FSA), and became the regulator for offshore non-bank financial services in the Seychelles.

While the SIBA, in the past, was also a service provider and facilitated international business, the FSA represents an evolution in international financial services in Seychelles, in that the new institution will concentrate solely on regulatory matters. It will be responsible for the licensing, supervision, and development of the non-bank financial services industry, including the registration and regulation of international finance companies, foundations, limited partnerships, and trusts in the Seychelles.

The authority’s Chief Executive Wendy Pierre confirmed that the FSA has the capacity and the commitment to fulfill its mission, which is to provide a sound regulatory system in compliance with international laws and practices.

She pointed out that, while the non-bank financial services industry has meant increased knowledge and expertise in the Seychelles in professional services, such as legal, banking and accountancy, she now also looked for the development of the Seychelles’ financial sector into new areas, including Islamic finance.

The FSA has also launched its new website, and has signed of memoranda of understanding with what were described as three of its most important stakeholders – the Central Bank of Seychelles, the Fair Trading Commission and the Seychelles Investment Board.

A comprehensive report in our Intelligence Report series giving a country-by-country analysis of offshore investment funds, stock exchanges and trusts, with an analysis of the US QI regime, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report9.asp

Source: Tax-News

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PEP names revealed in leaked records of China elite’s hidden offshore holdings

Close relatives of China’s top leaders have held secretive offshore companies in tax havens that helped shroud the Communist elite’s wealth, a leaked cache of documents reveals.

The confidential files include details of a real estate company co-owned by current President Xi Jinping’s brother-in-law and British Virgin Islands companies set up by former Premier Wen Jiabao’s son and also by his son-in-law. Nearly 22,000 offshore clients with addresses in mainland China and Hong Kong appear in the files obtained by the International Consortium of Investigative Journalists.

Among them are some of China’s most powerful men and women — including at least 15 of China’s richest, members of the National People’s Congress and executives from state-owned companies entangled in corruption scandals.

For the full story, go to the ICIJ website