U.S. authorities have identified a new target in their pursuit of hidden overseas assets: the Cayman Islands.
A yearlong probe conducted by the Internal Revenue Service led to the arrests of three financial advisers based in the Caribbean territory. A Justice Department official said the operation should serve as a warning to anyone with undisclosed assets overseas.
"The Cayman case illustrates that we have ways of getting information that people don't know about," Assistant Attorney General Kathryn Keneally of the Justice Department's Tax Division said at a news conference in New York. "The days of waiting for a warning sign, such as a letter from a bank, are over."
Among those sources, are whistleblowers hoping for monetary rewards. Ms. Keneally declined to comment as to whether the Department of Justice has names of Americans who hold accounts in the Caymans or elsewhere in the Caribbean.
If the U.S. authorities become aware of a taxpayer with undeclared offshore accounts, that taxpayer becomes ineligible to participate in the IRS voluntary disclosure program and is unable to obtain an assurance of no criminal prosecution.
Experts suggest that the names of account holders in the Caymans have come into possession of U.S. authorities.
"Announcements by the government about this case suggest it already has customer lists, although officials will not confirm," says Bryan Skarlatos, a lawyer at Kostelanetz & Fink in New York.
Since the beginning of the IRS crackdown on hidden overseas assets in 2009, more than 100 taxpayers have been indicted, while more than 43,000 taxpayers have entered voluntary disclosure programs.
The DOJ led the charge by taking down Swiss banking giant UBS in 2009. Other U.S. enforcement efforts involved accounts in the Caribbean, Israel, India and Liechtenstein. Recent arrests mark the first prominent case entered in the Caymans.
Joshua VanDyk, Eric St-Cyr and Patrick Poulin were arrested in Miami on March 12 and charged with money laundering and conspiracy to launder money on behalf of U.S. clients, according to the indictment unsealed last month.
The indictment states that Mr. St-Cyr was the founder of an unidentified Cayman-based investment firm with many U.S. clients that Mr. VanDyk worked for, while Mr. Poulin was a lawyer at a firm in the Turks and Caicos Islands with many U.S. clients.
The sting began in March of last year, when three IRS agents met with Messrs. St-Cyr and VanDyk in Miami. One of the men claimed to be a U.S. citizen interested in laundering $2 million. Messrs, Poulin, VanDyk and St-Cyr then arranged several transfers of $200,000 to prove the validity of the scheme.
In December, the funds were transferred from a Virginia account to Mr. Poulin's law firm in the Turks and Caicos, and then transmitted to an account in the Cayman Islands. Most of the funds were returned to the U.S. in February.
According to the indictment, Mr. St-Cyr and Mr. VanDyk claimed to charge more to launder criminal proceeds than to assist in tax evasion. The men used a foundation for laundering criminal proceeds, while a trust was used to conceal tax evasion.
Source: Saunders, Laura, "Offshore Accounts: The Next Target," The Wall Street Journal, April 4th, 2014