Offshore tax havens, foreign bank accounts, and shell companies are legitimate tools often used for wealth management, asset protection, and tax planning. For many, these strategies provide essential support in navigating complex global financial systems. However, the same structures that serve to protect assets can also be misused. When leveraged illegally, they can facilitate money laundering, fund terrorism, and hide illicit gains, casting a shadow over global financial transparency.
To fully grasp the global efforts to combat money laundering, it's important to understand the key components and mechanisms involved.
- What is money laundering (ML)? Money laundering, or money washing, is the process by which illegally obtained gains or assets are moved, relabeled, and shifted to hide the crime of origin by which they were acquired. The Financial Action Task Force (FATF) defines categories of crimes considered as money laundering, such as tax fraud, bribery, drug trafficking, and other tax crimes. The FATF is an organization founded in 1989 by the Group of Seven (G7) to support legitimate financial interests and act against tax fraud and crime. The abbreviation AML is often used and refers to anti-money laundering efforts.
- What constitutes Terrorism Financing (TF)? As the name suggests, TF is an activity that works to fund domestic or terrorist activity. TF is the funding of these illicit organizations, while money laundering is the process by which that funding oftentimes occurs. CFT refers to combating the financing of terrorism. Efforts taken against money laundering to finance terrorist organizations or cells are also critical to comply with sanctions and actions to prohibit the financing and proliferation of weapons of mass destruction (WMD).
The FATF has a global responsibility for developing regulatory recommendations regarding AML and CFT efforts. FATF coordinates with the United Nations, the International Money Fund, and the World Bank.
The legal use of foreign bank accounts and offshore tax structures can be important to nurturing, protecting, and growing wealth. Problems arise when the infrastructure of offshore finance is used illegally. In addition to TF, illegal diversion of taxable assets leads to economic malaise and instability, weakened governance and financial institutions, and an impact on global financial flow.
Offshore tax tools can provide legitimate assistance with wealth management and growth. But if used under the radar, the same tools can put you at risk of an IRS investigation or an audit. When you have questions, speak with an experienced tax attorney about your situation.
Talk to our criminal tax attorney group if under suspicion or already involved in an IRS investigation for tax crimes or fraud
If concerned about compliance, speak with our tax lawyers about your situation and best options. We have offices in Chicago and Cleveland and serve clients throughout the U.S. and abroad. Call 440-250-9709 or contact us online today.
