FCPAméricas Blog

The Panama Papers: What U.S. Enforcement Could Look Like

Author: Guest Author

PanamaFlagThe following guest post is from Timothy O’Toole, a Member of Miller & Chevalier who focuses on sanctions, export controls, and other international regulatory and compliance issues.

The Panama Papers have recently become a worldwide, front-page news story, in the wake of reports from the International Consortium of Investigative Journalists (ICIJ) describing the alleged involvement of a number of individuals in offshore bank accounts. But while the reports have generated significant news coverage, the remaining question is whether they will also generate enforcement actions. The answer is likely yes.

Indeed, a virtual roadmap for such investigations already exists, with U.S. regulators and prosecutors having recently targeted the Swiss banking system, and in particular the use of secret accounts there. These actions have largely been brought pursuant to U.S. criminal tax laws under theories that Swiss banking professionals assisted or conspired with clients to avoid tax liabilities in the United States. Dozens of Swiss entities have been implicated. One Swiss bank (Wegelin & Co.) that refused to cooperate because it did not maintain U.S. offices and thus believed itself to be untouchable by U.S. authorities was criminally indicted in New York, its correspondent bank accounts were seized, and the oldest private bank in Switzerland ultimately dissolved. Another bank with global operations and a significant U.S. presence (Credit Suisse) delayed cooperating and ultimately had to plead guilty to a criminal tax conspiracy. Credit Suisse paid more than $1.6 billion because of its admitted involvement in aiding and assisting U.S. taxpayers in hiding their money from the U.S. Internal Revenue Service (IRS).

In the Swiss investigations, U.S. authorities did not focus solely on the banks’ conduct, but specifically sought information concerning client advisors at the banks, external asset managers, trustees, fiduciaries, nominees, accountants and attorneys who were associated with the undeclared U.S. assets.

This time around, those Panamanian professionals who worked to create the offshore accounts may be at risk too if regulators and prosecutors believe that those professionals intentionally provided access to offshore vehicles as a means of allowing individuals or companies to evade taxes or economic sanctions. In fact, it is said that the U.S. Department of Justice and the IRS have already launched criminal investigations into the international tax evasion schemes exposed by the Panama Papers and will use this information in their continuing efforts to combat and prosecute offshore tax fraud.

Enforcement risks will likely be buttressed by new information made available. The ICIJ has suggested it will provide a list of those mentioned in the Papers this month. This means that individuals or companies who have not yet been implicated, but fear they may be, are facing serious decisions about whether to obtain counsel now, and what actions can or should be taken before additional information is released.

These risks could also include investigations and prosecutions under the FCPA. News reports have suggested some of the offshore accounts have been linked to high ranking political officials from around the world. If that is true, regulators and prosecutors are almost certain to ask where the money came from and why the officials felt the need to place it in an offshore account. Because one potential answer to these questions is that the money was the hidden proceeds of public corruption, it seems likely that FCPA investigators in the US and regulators from around the world will be watching Panama Papers developments closely. Information revealed may also serve to provide additional information relevant to FCPA investigations already underway.

Finally, it is not too soon to consider some of the challenges that enforcers could face in bringing cases based on the Panama Papers. Probably the most interesting of these surrounds the origin of the allegations. If it is true, as has been reported, that the papers were the product of an unlawful “hack” into servers at the Panama-based Mossack Fonseca law firm, then serious questions could arise about the admissibility of those papers in any later legal proceeding. Many jurisdictions restrict the use of unlawfully obtained evidence. In addition, many jurisdictions follow some rule of attorney client privilege and attorney confidentiality. If an entire investigation has arisen out of an unlawful intrusion into the attorney client relationship, and the evidence to support it consists solely of stolen computer files, can the charges go forward? The answer to such questions will likely be very case specific, but the question itself is one that those who may be defending these cases must begin considering now.

The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.

© 2016 FCPAméricas, LLC

Post authored by Guest

Categories: Anti-Money Laundering, Enforcement, English, FCPA, Panama

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