According to Law360 Offshore Tax Havens and Nominee Entities pose a significant regulatory and compliance risks to international financial institutions.
Regulatory authorities around the world, including the U.S. Department of Justice, intensified their investigations into offshore tax havens after the April 3, 2016, publication of names associated with the Panamanian law firm Mossack Fonseca, widely known as the “Panama Papers,” and the firestorm of public outcry.
International financial institutions frequently open accounts in the name of offshore entities. In order to combat the risks of facilitating tax evasion, most financial institutions apply rigorous “know your client” and new client adoption procedures. Even with these processes in place, financial institutions retain limited insight into a client’s true intentions.
While account opening documentation usually includes language admonishing that the account holder solely is responsible for the tax compliance of the assets held in the account, the trend in international enforcement is to question the sufficiency of such clauses.
Financial institutions no longer can afford simply to delegate responsibility for tax compliance of accounts they hold for their clients. Banks and financial institutions that preemptively conduct rigorous risk assessments of offshore entity accounts and implement stricter compliance and oversight measures will be the best prepared to answer when the DOJ or another regulatory authority comes calling.
is Right for Them?
Read more at: Tax Times blog