Foreign Tax Cheats Find U.S. Banks a Safe Haven

For all the bluster about cracking down on Americans who hide money overseas, the U.S. turns a virtual blind eye to foreign tax cheats who are parking money in the U.S. banking system. In particular, the U.S. effectively serves the role of Switzerland for Mexico, which suffers from rampant tax evasion — rates go as high as 70% among professionals and small businesses, and 40% among larger businesses. Much of the estimated $42 billion a year of illicit funds flowing out of Mexico each year (not including drug cartel money) ends up in U.S. banks, according to Global Financial Integrity, an advocacy group in Washington.

It’s not that the U.S. has no policies in place to stem the flow of illicit monies into the U.S. banking system. American banks are in fact required to file suspicious activity reports (SARs) for cash deposits over $10,000 or when they detect deposit patterns in lower amounts, known as “structuring.” The problem is that the U.S. government is overwhelmed by more than a million of these reports a year. Computers can detect some irregularities, but these need to be combed through carefully by 85 SAR review teams — combining FBI, IRS, DEA and U.S. Attorneys — across the country. That’s why, says international white collar crime lawyer Bruce Zagaris, “U.S. officials have practically begged banks to call them when they have something really good.”

This could change significantly with a seemingly simple regulatory adjustment, which Mexico has requested: they want the same information-exchange arrangement that Washington exclusively has with Canada, which automatically reports interest income paid by U.S. banks to Canadian account holders.

Look for even tigher reporting regulations and make absolutlely sure you file reports and disclosures to the IRS in a timely fashion.. Read More here.

This entry was posted on 31. October 2009 at 18:09 and is filed under Taxation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.