The Panama Papers leak has led President Obama to urge Congress to take action now against corruption and illegal financial activity. This recent, large-scale information leak has made it impossible for the government to ignore the less positive aspect of shell companies, which in theory protect the market from speculative price gouging when companies prepare to make big moves on the market, but which also have been used to hide the illegal activities of less honest beneficiaries.

The US Treasury Department took steps on May 6, 2016 to do its part to reign in the illegal use of otherwise legal shell companies. Financial institutions are now required to conduct “customer due diligence” and verify who actually owns and benefits from the companies that use their services. Law enforcement will be able to access this information. The Treasury also proposed that certain foreign-owned companies should obtain a federal tax identification number and participate in ownership and transaction reporting requirements.

President Obama has called upon Congress to add to the strength of these measures by taking action now to increase transparency and the ability of law enforcement to battle corruption. These include:

  1. Passing the Treasury’s proposal on “beneficial ownership” transparency;
  2. Enabling law enforcement officials to obtain information from domestic and foreign banks to investigate and prosecute money laundering, as well as broadening the Justice Department’s ability to prosecute for money laundering;
  3. Approving eight tax treaties that will give US officials better tools to investigate and prosecute tax evasion via offshore accounts; and
  4. Strengthening Obama’s 2010 legislation establishing foreign financial institution reporting requirements and creating more equal reciprocity with our foreign partners.

The IRS has several Offshore Voluntary Disclosure Programs that will allow you to come into compliance, pay reduced penalties, and manage the risk of a criminal investigation.

If you think you need to participate in a voluntary disclosure program, contact one of our attorneys today.