May 2016 JD Supra
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First FATCA Conviction! was published by JD Supra on 5/15/16.

On May 9, 2016, the Department of Justice (DOJ) announced its first FATCA conviction. It appears to be the beginning of criminal prosecutions by the DOJ against apparent or alleged violations of FATCA reporting requirements. The “Mulholland” case represents the first time that the Government has brought criminal charges based upon alleged violations of FATCA. Mullholland is a dual citizen (US and Canada) (who was indicted and pleaded guilty), that secretly owned an offshore broker-dealer, and an IMC (Investment Management Company) in Panama and Belize. Mulholland played an offshore shell company game, giving him the ability to launder profits back in to the US banking system. His strategy for abusing financial markets attracted the attention of the US Government. The investigation included: US Immigration and Customs Enforcement (ICE), Homeland Security Investigations (HIS), Federal Bureau of Investigations (FBI), Internal Revenue Service – Criminal Investigation (IRS-CI) and the US State Attorney’s Office. In addition to the fraudulent promotion of securities and money laundering, Mulholland also attempted to circumvent IRS reporting requirements under FATCA.

The Internal Revenue Service Criminal Investigation Division conducts criminal investigations regarding alleged violations of the Internal Revenue Code, the Bank Secrecy Act and various money laundering statutes. The findings of these investigations are referred to the Department of Justice for recommended prosecution consideration. “The use of
overseas accounts and other offshore mechanisms to conceal income and assets is obviously of great interest to the Internal Revenue Service,” stated IRS-CI Special Agent-in-Charge Kitchen. “Investment fraud schemes that incorporate these means to hide proceeds ultimately make the Internal Revenue Service an unwitting, additional victim. In response,
IRS-Criminal Investigation, working with our law enforcement partners, will follow the global financial trail to unravel such crimes.”
International tax compliance enforcement is a priority effort for our Government. Tax avoidance schemes, cross-border transactions and complex “hard to understand” business structures have heightened IRS tax compliance concerns. The prevention of tax schemes, money laundering, and the flow of narcotics and terrorist funding is a coordinated effort IRS-CI
undertakes with other countries. IRS-CI has special agents that are forensic accountants trained to follow the money.
IRS-CI has expanded its overseas presence by assigning attachés to key foreign embassies and consulates. In the case of Mulholland, undercover agents and wiretaps were used to record numerous conversations. These recorded conversations provided evidence of strategies to evade FATCA’s reporting requirements and establish corporate
structures to do so.
The take away here is the DOJ first FATCA conviction. Non-compliant actions can attract the attention of IRS-CI, raise the eye brows of regulators and get a criminal investigation started. Don’t be a victim of your own making. If you are out of compliance, consult your tax specialist now. This will be easier than getting arrested by the FBI while your flight in on a
brief layover – exactly what happened to Mulholland.