IRS involved in shutdown of bank for tax evasion and money laundering

Accounting

The Internal Revenue Service’s Criminal Investigation division worked with tax authorities abroad on a joint operation that eventually led to the shutdown of Euro Pacific International Bank by officials in Puerto Rico.

IRS CI officials described their work during a press conference Thursday with other members of the Joint Chiefs of Global Tax Enforcement, also known as J5, which includes tax authorities from the U.S., the U.K., Canada, Australia and the Netherlands. The Office of the Commissioner of Financial Institutions (OCIF) of Puerto Rico issued a cease and desist order and suspended the operations of  the bank. Two years before the suspension, the J5 conducted a global day of action, known as Operation Atlantis, to put a stop to the suspected facilitation of offshore tax evasion and money laundering by the bank.

Each country independently executed enforcement actions consistent with the legal requirements in their countries, such as intelligence and information gathering, search warrants, interviews, production orders and subpoenas. The series of internationally led investigations revealed a number of clients at the bank used a series of sophisticated structures and international financial institutions to conceal their tax situations, evade tax obligations and launder money from the proceeds of their crimes. 

IRS-Building-light
The IRS headquarters building in Washington, D.C.

Andrew Harrer/Bloomberg

There were no indictments announced, but the suspension of operations aims to deter tax evasion by the bank’s client. 

“This coordinated day of action put a stop to the suspected facilitation of offshore tax evasion and money laundering by this private bank in Puerto Rico,” said IRS CI chief Jim Lee during the press conference. “During the investigation, it became apparent to us that we — IRS Criminal Investigation and the broader J5, — had simultaneous actions going and we sent information back and forth through the legal channels that were open to us. We’re here today because the actions taken by OCIF were the most appropriate and expedient actions that could be taken. In transparency, this is not where I thought we would end up two years ago when we executed that global day of action for the J5. There was no indictment of the bank or of those running the bank, but investigations sometimes lead us in different directions, and this is certainly one of them. One of the focuses of IRS CI, and that is echoed in the J5, is identifying noncompliance in general and taking steps to ensure that bad behavior is corrected. We’re committed to working with a wide range of partners to utilize all of the tools that each partner brings to the table. This cohesive approach ensures that all outcomes are considered.”

He and the other J5 chiefs said that while they supported the actions taken by OCIF, the outcomes were not the result of a joint investigation and OCIF’s decisions were independent of the J5. The J5 did not participate in the investigation by OCIF but welcomed the result. The global tax chiefs said they stand by Puerto Rico’s financial institution regulator as the bank was shut down after having been a target back in 2020 of the J5’s global day of action.

“When we launched the J5, we were determined to make the world a smaller place for tax evaders,” said Simon York, director of fraud investigation at Her Majesty’s Revenue and Customs and the U.K’.s J5 chief, in a statement. “The honest majority can be confident that our approach is working. “We have a series of tax enquiries, full criminal investigations and intelligence operations already underway and many more to come. Our message

is that the game is up for offshore tax evaders and that any U.K. citizens involved with this bank

should come and talk to us.”

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