Quatloos! > Investment
Fraud > Financial
Planning > Hiding
Also known as:
- Secret Bank Accounts
- Secret Offshore Bank Accounts
- Anonymous Accounts
- Swiss Bank Accounts
What It Is
You place your money with someone offshore. They
declare that the money is theirs, and you deny that the money
is yours. The money then grows tax-free, and your creditors cant
get it since you will deny that it exists.
Whoever youve given your money disappears with it, or
will not give it back, and you cant go to the authorities
for fear of revealing that you have committed tax evasion.
Whoever youve given your money to not only keeps your
money, but actually extorts additional money out of you, which
you pay so that they dont reveal that you have committed
This happens ALL THE TIME. Every day some sucker
gets off his or her cruise liner at some offshore centre, walks
over to the nearest offshore service provider and says "I
want a trust and a secret bank account" and then hands them
the money. And, about once a month, a publication such as Offshore
Alert or a scam site somewhere will run a story about how an offshore
service provider disappeared with their clients' money.
We wish we could find a statistical breakdown
of how much money disappears by the process, but I can't because
the inherently secretive nature of these transactions means that
there is no reporting upon which such statistics could be based.
However, we estimate that worldwide it is easily in excess of
US$100 million annually, and perhaps much more.
It is easy to get sucked in by offshore service
providers (after all, the major offshore banks encourage you to
have secret accounts) because there is a "Hide the Money"
atmosphere offshore. They will show you the laws of the offshore
jurisdiction (which, after all, are structured just for this very
purpose) and tell you that there is "no way" that the
Revenuers could ever find out what you have done.
The rub is, however, that for this to work you
cant declare that you have an interest in the account or
report any interest earned on the account. This means that you
are committing tax evasion -- a very serious crime. This means
that if the offshore service provider simply keeps your money
and refuses to give it back, you are pretty much screwed. You
cant go to your government to complain, and the government
of the country where you placed your money will probably protect
the offshore service provider more than you (after all, it is
bad business if it admits that an offshore service provider was
embezzling money). So, youre just screwed -- and worse
the offshore service provider might start embezzling even more
money out of you by telling you that they will turn you in (and
send you to prison and ruin your life) if you dont cooperate.
The solution is to JUST DONT DO IT. Dont
ever trust your money to anybody but yourself, or a well-regulated
bank or trust company. And dont try to hide your money from
the IRS -- life is too short for the grief of worrying about this.
Structure your affairs so that you can disclaim the money when
creditors come knocking, but if you really own it report it to
the IRS and pay your taxes on it (there are a variety of ways
that you can legally declare it to the IRS while at the same time
innoculating it from creditors, such as by forming an offshore
limited partnership) and then keep it in a respected and regulated
offshore bank or trust company.
Because if you hide the money, the next most
likely thing to happen is that your money will then be hidden
Report of Foreign Bank and Financial Accounts
If you own a foreign bank account, stock account, mutual fund,
unit trust, or other financial account, then you may be required
to file a Treasury Department Form 90-22.1, which provides in
part as follows:
This form should be used to report financial
interest in or signature authority or other authority over
one or more bank accounts, securities accounts, or other financial
accounts in foreign countries as required by the Department
of the Treasury Regulations (31 CFR 103). You are not required
to file a report if the aggregate value of the accounts did
not exceed $10,000. SEE INSTRUCTIONS ON BACK FOR DEFINITIONS.
File this form with Dept. of the Treasury, P.O. Box 32621,
Detroit, MI 48232
* * *
A. Who Must File a Report -- Each United
States person who has a financial interest in or signature
authority or other authority over a bank, securities, or other
financial accounts in a foreign country, which exceeds $10,000
in aggregate value at any time during the calendar year, must
report that relationship each calendar year by filing TD F
90-22.1 with the Department of the Treasury on or before June
30, of the succeeding year.
* * *
B. United States Person -- The term "United
States person" means (1) a citizen or resident of the
United States, (2) a domestic partnership, (3) a domestic
corporation, or (4) a domestic estate or trust.
D. Account in a Foreign Country -- A "foreign
country" includes all geographical areas located outside
the United States, Guam, Puerto Rico, and the Virgin Islands.
* * *
F. Bank, Financial Account -- The term "bank
account" means a savings, demand, checking, deposit,
loan or any other account maintained with a financial institution
or other person engaged in the business of banking. It includes
certificates of deposit.
The term "securities account" means
an account maintained with a financial institution or other
person who buys, sells, holds, or trades stock or other securities
for the benefit of another.
The term "other financial account"
means any other account maintained with a financial institution
or other person who accepts deposits, exchanges or transmits
funds, or acts as a broker or dealer for future transactions
in any commodity on (or subject to the rules of) a commodity
exchange or association.
G. Financial Interest -- A financial interest
in a bank, securities, or other financial account in a foreign
country means an interest described in either of the following
(1) A United States person has a financial interest
in each account for which such person is the owner of records
or has legal title, whether the account is maintained for
his or her own benefit or for the benefit of other including
non-United States persons. If an account is maintained in
the name of two persons jointly, or if several persons each
own a partial interest in an account, each of those United
States persons has a financial interest in that account.
(2) A United States person has a financial interest
in each bank, securities, or other financial account in a
foreign country for which the owner of record or holder of
legal title is: (a) a person acting as an agent, nominee,
attorney, or in some other capacity on behalf of the U.S.
person; (b) a corporation in which the United States person
owns directly or indirectly more than 50 percent of the total
value of shares of stock; (c) a partnership in which the United
States person owns an interest in more than 50 percent of
the profits (distributive share of income); or (d) a trust
in which the United States person either has a present beneficial
interest in more than 50 percent of the assets or from which
such person receives more than 50 percent of the current income.
H. Signature or Other Authority Over an Account --
Signature Authority -- A person has
signature authority over an account if such person can control
the disposition of money or other property in it by delivery
of a document containing his or her signature (or his or her
signature and that of one or more other persons) to the bank
or other person with whom the account is maintained.
Other authority -- exists in a person
who can exercise comparable power over an account by direct
communication to the bank or other person with whom the account
is maintained, either orally or by some other means.
I. Account Valuation -- For items 7, 9,
[of the form] and Instruction A, the maximum value of an account
is the largest amount of currency and non-monetary assets
that appear on any quarterly or more frequent account statement
issued for the applicable year. If periodic statements are
not so issued, the maximum account asset value is the largest
amount of currency and non-monetary assets in the account
at any time during the year.
* * *
O. Penalties -- For criminal penalties for
failure to file a report, supply information, and for filing
a false or fraudulent report see 31 U.S.C. 5322(a), 31 U.S.C.
5322(b), and 18 U.S.C. 1001.
Would this include a debit card? Yes!
-- Many offshore service providers will tell you that they
will own the account, but you will get a debit card to use, and
the debit card does not trigger the filing of the TD F 90-22.1.
This is completely false, as a debit card clearly constitutes
authority over the account. Use of a debt card for an unreported
account over $10,000 is tax evasion.
Will the filing of this form cause me to
get hung up in Customs or audited? This is a stupid question,
if you think about it. The Treasury Department is looking for
people who don't file the form, not those who have filed
it. If you shuffle tens of thousands of dollars in and out of
the country by wire-transfer every year and then don't file the
TD F 90-22.1, you can pretty much count on being audited
and then forever hung up in Customs.
Have a question for Quatloos?
Diversion of income to offshore tax havens with strict bank secrecy
laws represents a significant area of noncompliance with the tax
laws. The IRS is taking major steps to combat this problem.
One way individuals divert income and evade their U.S. tax obligations
is by maintaining bank accounts in foreign tax havens and using
credit or debit cards issued by the offshore bank. It is not illegal
to have an offshore credit card. However, people use these cards
to tap into foreign bank accounts to get easy access to cash while
evading paying taxes. They can use the cards to pay for everyday
expenses like groceries and gas or even purchase luxury items such
as boats and cars.
Since these cards are issued from banks located in tax haven countries,
it has been very difficult for the IRS to trace these transactions
back to the taxpayer. For years, people assumed we wouldn’t
be able to find them. Now, we have a way.
Simply put, the guarantee of secrecy associated with offshore banking
The IRS is seeing encouraging results from its efforts involving
the John Doe summons. The agency is committed to following up on
questionable transactions and pursuing individuals dodging their
tax responsibilities. Already, the IRS is moving forward on hundreds
of credit card cases for civil audits or potential criminal investigation.
And in the months ahead, the IRS will take additional steps to
combat offshore accounts used for tax avoidance or evasion.
These actions should send a clear message to tax evaders. If people
use these illegal offshore methods to hide their income, we will
find out who they are.
If taxpayers are involved in these schemes, it is time to make
things right. We urge these taxpayers to consult with a reputable,
trusted tax professional for advice.
Taxpayers thinking about getting involved in offshore schemes should
think again. It is one of the biggest mistakes they can make. Taxpayers
who want to report possible schemes can call the IRS at 1-800-829-0433.