Today the International Consortium of Investigative Journalists released information from the corporate registries of four more tax havens that were included in the Paradise Papers investigation:  Barbados, the Bahamas, Aruba, and Nevis.  There are now a total of 55 jurisdictions searchable on the the Offshore Leaks database.  In total more than 160,000 entities and close to the same number of shareholders and directors of those companies were added to the Offshore Leaks database.  With today’s release, the Offshore Leaks database now has information on more than 680,000 entities like companies, foundations, and trusts.

As we previously reported, the Paradise Papers consist of nearly 13.5 million leaked files from Appleby, a leading offshore law firm based in Bermuda and elsewhere. The files were initially obtained by German newspaper Süddeutsche Zeitung (which also obtained the Panama Papers), which shared them with ICIJ and a consortium of media partners. According to ICIJ, the Paradise Papers include loan agreements, financial statements, emails, trust deeds, and other documents spanning a 50-year period.

Of particular note, the Paradise Papers contain far more information about U.S. citizens, residents, and companies than previous leaks such as the Panama Papers. According to ICIJ, the Paradise Papers contain information about at least 31,000 U.S. individuals and companies.

Individuals who believe they may be identified in the Paradise Papers as the beneficial owner of an offshore company or a foreign bank account, or the beneficiary of an offshore trust, and have not disclosed such interest to the Internal Revenue Service, should consider prompt action to mitigate the risk of criminal prosecution and harsh financial penalties. The IRS has long maintained a number of well-publicized voluntary disclosure programs that afford non-compliant U.S. taxpayers the opportunity to avoid criminal prosecution by self-disclosing their non-compliance to the IRS, explaining the facts and circumstances of non-compliance, and paying back taxes, interest, and penalties. The most popular voluntary disclosure program offered by the IRS is the Offshore Voluntary Disclosure Program (OVDP), which is directed at non-compliant taxpayers with secret offshore assets. U.S. individuals identified as beneficial owners of secret offshore companies may take advantage of the OVDP to avoid criminal prosecution, but only if they commence the voluntary disclosure process before the IRS learns of their non-compliance from third-party sources, including whistleblowers. Thus, time is of the essence, and individuals concerned about being named in the Paradise Papers database should act quickly and consider whether a voluntary disclosure to the IRS is warranted.

Since 2009, the United States government has undertaken an aggressive enforcement campaign to combat offshore tax evasion by individuals using secret bank accounts in numerous other tax havens around the world, and the use of offshore structures to obscure beneficial owners. The following statistics present a compelling case:

  • The Justice Department has criminally charged more than 100 U.S. accountholders who have evaded U.S. tax laws using hidden offshore accounts, and nearly 50 individuals (mostly foreign nationals) who assisted them.
  • As a result of the Justice Department’s “Swiss Bank Program,” 80 Swiss banks admitted to aiding and abetting tax evasion by their U.S. customers, and paid more than $1.3 billion in penalties.
  • Under threat of criminal prosecution, more than 55,000 individuals have come forward to disclose their offshore accounts to the IRS through the OVDP and other voluntary disclosure programs, paying more than $8 billion in tax, penalties, and interest.
  • Under the Foreign Account Tax Compliance Act (FATCA) signed into law in 2010, financial institutions in over 100 countries around the world have agreed to report information regarding their U.S. clients to the United States, in an effort to ensure that tax cheats cannot hide assets offshore.

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