The action taken by the IRS recalls the 2016 Pandora Papers document leak, where more than two terabytes of documents from financial entities that serve wealthy individuals and businesses with their offshore tax strategies fell into the hands of journalists. According to the International Consortium of Investigative Journalists (ICIJ), millions of records belonging to Trident Trust were leaked with the Pandora Papers. Documents from the Trident Trust trove were also linked to Russian oligarch, Suleiman Kerimov, among many other high-placed, high-asset persons.
In a statement, the U.S. Attorney General’s office for the Southern District of New York notes that employees of Trident Trust Group are named as the officers and directors of “thousands of Panamanian companies.” The use of shell companies in offshore tax jurisdictions is commonplace among firms that provide offshore tax services, primarily because they help shield the identity of asset owners.
As noted by former IRS Commissioner Danny Werfel, “U.S. taxpayers and their facilitators who hide offshore income generating activities and assets from the U.S. government are on notice that the IRS continues to prioritize combatting offshore abusive activities. These records will assist the IRS and its partners in finding those taxpayers, ensuring their compliance with the U.S. tax laws and delivering on our mission of a fair tax system.”
A John Doe summons is a particular type of summons used by the IRS when it has evidence to provide to the court to support their belief that an individual or class of individuals has breached a provision of the Internal Revenue Code (IRC).
The court order in this matter authorizes the IRS to seek information from Trident Trust affiliate Nevis Services and twelve other entities, including the Hongkong and Shanghai Banking Corporation (HSBC) Bank, the Federal Reserve, The Bank of New York Mellon Corporation (BNY Mellon), Deutsche Bank, FedEx, and others. The use of the summons does not infer that any of the organizations named are suspected of tax crimes, but is aimed at individuals who may have engaged in tax evasion whose identities are currently unknown.
The IRS continues to intensify its focus on offshore tax compliance, using powerful tools like John Doe summonses to uncover unreported foreign assets. If you have offshore holdings and are unsure about your reporting obligations, it’s critical to seek legal guidance before the IRS comes calling. Failing to disclose foreign assets can lead to steep penalties—even criminal charges.
Our experienced tax attorneys can help you navigate offshore tax compliance and mitigate potential risks. Set up a consultation or call us at 440-250-9709. We serve clients across the U.S. and internationally from our offices in Cleveland and Chicago.
For a deeper understanding of offshore tax regulations and the potential risks of non-compliance, download our free eBook, Offshore Tax Matters Explained. The information in this guide can be very helpful if you are considering protecting your wealth offshore—but would like to know what's involved in the process.