William Jennings, Managing director of Leadenhall Bank & Trust Company said Monday that it is the responsibility of the firm’s customers to disclose certain information to the U.S. Internal Revenue Service, and not that of the offshore bank.
Mr. Jennings was refuting reports that the Justice Department and the IRS had filed petitions in seven federal courts seeking records from MasterCard accounts from Leadenhall.
“The IRS is pressing our clients to do that,” Mr. Jennings told The Guardian on Monday. “Our clients always sign a waiver of bank secrecy and we strongly recommend that they get their own legal advice.”
He acknowledged, however, that the situation would change in 2006, when the provisions of a proposed Bahamas/US tax information agreement take effect.
Expressed money laundering concerns resulted in The Bahamas and other Caribbean nations being blacklisted by the Financial Action Task Force and the Organisation for Economic Cooperation and Development.
The Bahamas rushed to comply with FATF/OECD recommendations to meet international “best practices” standards by revamping its financial laws, and remains under FATF/OECD scrutiny.
Additionally, the U.S. Government is targeting individuals suspected of using credit and debit cards issued by offshore banks to hide income from U.S. tax collectors.
The Justice Department and Internal Revenue Service last Thursday filed petitions in seven federal courts seeking records from MasterCard accounts at the Leadenhall Bank & Trust Co.
The actions were reportedly taken because the 10 individuals involved refused to produce records sought through earlier court summonses.
The IRS said it has already has obtained thousands of Visa, MasterCard and American Express records involving accounts at dozens of banks in tax haven countries. But Thursday’s move was the first time since the initiative began in October 2000 that individual Americans have been targeted.
It is perfectly legal to have a credit or debit card issued by an offshore bank, but it is a violation of U.S. tax laws to hide income from the IRS in these accounts and then use the payment card to access them in the United States. Bank secrecy laws in tax haven countries render the money difficult to trace.
The court actions come as time grows short for people who have offshore credit and debit cards to come forward voluntarily and pay their taxes without fear of civil penalties or criminal liability. The IRS has given such persons until April 15 to comply; IRS officials say that that initiative has produced several million dollars in revenue.
Thousands of individuals who have the credit and debit cards
SEE BANK, BUSINESS 2
will face audits, and several dozen cases have been referred for possible criminal prosecution. The IRS said that initial estimates that one million cardholders may have illegal offshore accounts were high, as an unspecified number of persons have multiple accounts.
On January 24, 2002, the governments of The Bahamas and United States signed an agreement for the Provision of Tax Information in the U.S. Treasury Department’s Diplomatic Reception Room.
Then-Treasury Secretary Paul O’Neill and Bahamian Finance Minister Sir William Allen signed the tax information exchange agreement on behalf of their respective governments.
The speech by Sir William Allen, then-Minister of Finance is reproduced below:
“We are pleased that we have been able to reach a very
balanced Tax Information Exchange Agreement which takes full account of fundamental interests of both The Bahamas and the United States.
The Bahamas is firmly against the use of its financial system for illicit purposes. We are determined that the same financial standards apply in The Bahamas as apply in other recognized financial centres.
Our commitment to this fundamental principle was demonstrated by the compendium of comprehensive legislation passed in December, 2000 and the other steps taken to strengthen our regulatory framework in support of our fight against money laundering and other crimes, to expand and deepen our prudential supervision oversight, and to provide for international cooperation in financial supervision.
The Bahamas wishes to ensure that its international financial centre will at all times enjoy the respect and confidence of the international community, and always provide a level of confidentiality appropriate to a respected financial system.
We are gratified by the United States Government’s recognition of the integrity of The Bahamas as a financial centre, and, as a small state, we are especially encouraged by the stated commitment of the United States Government to the principle of a level playing field in matters of international cooperation.
The Bahamas and the United States have historically had very close relations based on our shared values and our strong democratic traditions. We have in recent times strengthened our cooperation in the fight against terrorism, drug-trafficking, money-laundering, financial crimes and alien smuggling.
Without doubt, this agreement is a further advancement of the level of cooperation and the bond of friendship between our two countries, and it is in this spirit of cooperation that we are pleased to execute it.”
By Lindsay Thompson, The Nassau Guardian
