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| Flags of Convenience |
Overseen Overseas
Michelle Seaton
06/15/2005
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By December 2000, almost every financial institution in some four dozen tax refuges—including the Caymans, the British Virgin Islands, Switzerland and Liechtenstein—had signed on. Between the tax treaties and the QI agreements, the Treasury Department has effectively extended the know-your-customers provisions of the Bank Secrecy Act into the world’s erstwhile tax havens. With
a court order or a money laundering conviction in hand, a U.S. government official can freeze virtually any account almost anywhere in the world. “Of course, we try to resist these things,” says Robert Vrijhof, senior partner of the investment firm Weber Hartmann Vrijhof & Partners in Zurich. “It has to be a crime in Switzerland before we seize any accounts. You have to deliver a verdict from a [Swiss] judge for money laundering,” he says. Scrantom finds this assertion amusing: “For years I’ve told people that it’s easier to freeze accounts in Switzerland than it is in Delaware.”
Meanwhile, in 2000, the IRS asked Visa and American Express to release information on U.S. citizens who hold credit cards issued by offshore banks. After a token squabble in the courts, the card companies complied and allowed the IRS to search transactions of those cardholders suspected of evading taxes or of living beyond their means.
Capital Intentions
Today an investor who, for example, inquires about the best way to form an offshore trust will likely face intense scrutiny. Heller’s firm screens potential clients to ensure that they have complied with IRS reporting standards in the past and insists that they do so in the future. “We want to make sure that they aren’t removing assets away from creditors. We have to know that what they’re doing is legal.”
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