There have been media reports of late on how US prosecutors are trying to determine what role financial professionals in Hong Kong play in evasion of US taxes and how the US government has succeeded in penetrating Swiss banking secrecy.
And now we are told there will be new qualifying intermediary rules under which any financial institution that invests in the United States will be penalised unless it identifies any Americans on behalf of whom it is investing.
One Swiss bank recently avoided US prosecution by agreeing to disclose details of thousands of accounts held by Americans and to pay US$780 million in fines. This must be contrary to Swiss banking laws preventing details being revealed.
Clients might rightly feel aggrieved that they are being offered up by their banker to save the bank's skin. On the other hand, members of the wider community might have little sympathy for these account holders on the basis that they are probably filthy rich and should have been correctly declaring income earned on their accounts, so have got what they deserved.
One article states that so far prosecutors have won guilty pleas from six US bank clients who have described 'a web of bankers, lawyers and advisers who helped conceal income and assets'. Apparently these people helped them set up 'shell companies' to conceal accounts. Four of these people used Hong Kong corporations in their structures.
I am not clear on what exactly a shell company is. The term seems to be used in a derogatory way to describe a company that holds assets rather than engages in manufacturing or 'real business'. It seems to me nonsense to try to describe a company in this way. If it is incorporated, then it is proper and that is the end of it. Companies should not be defined by their activities, turnover or other criteria as being somehow false if they do not accord to the US tax authority's view of the level of activity required to make that company 'proper'.
The 'web of advisers' seem to be people who helped lead the poor US citizen down this illegal path. Ridiculous. There is nothing illegal or immoral about placing assets into a corporate structure. Of course US citizens have a duty to declare ownership of corporate structures and pay tax on income accruing to them. I am sure they were not advised otherwise. The offence took place when they filed their tax returns and 'forgot' to make the proper declarations. There was no offence in putting the assets into the structure, nor were their advisers doing anything illegal in helping them set up the structure. The US citizens could equally well have forgotten to declare the interest on accounts held in their own name.