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Mystery Central American Firm Targeted in Crackdown on Tax Plot

Global Tax Crackdown Targets Central American Financial Firm

(Bloomberg) -- A Central American financial institution is suspected of helping clients worldwide evade taxes and launder money, according to tax investigators from the U.S., the Netherlands and three other nations coordinating a crackdown.

Clients at the unidentified firm “may be using a sophisticated system to conceal and transfer wealth anonymously,” the group of tax enforcement agencies said in a statement on Thursday.

Through a “coordinated day of action” this week, tax authorities shared intelligence and used search warrants, subpoenas and interviews to build their cases, according to a statement by the Joint Chiefs of Global Tax Enforcement, or J5. Each country is expected to take criminal, civil and regulatory actions as the investigation grows, the statement said.

“This is the first coordinated set of enforcement actions undertaken on a global scale by the J5,” said Don Fort, chief of the U.S. Internal Revenue Service Criminal Investigation Division. “Working with the J5 countries who all have the same goal, we are able to broaden our reach, speed up our investigations and have an exponentially larger impact on global tax administration.”

It wasn’t immediately clear why the J5 publicized the operation before taking public action in court. The other nations involved are the U.K., Australia and Canada.

The revelation draws parallels to Panamanian law firm Mossack Fonseca & Co. In 2016, millions of documents leaked to a consortium of journalists showed how the firm’s lawyers worked with European banks to create more than 200,000 offshore shell companies for rich clients, including world leaders, 140 politicians and public officials, star athletes and criminals that were used to hide wealth. The files, known as the Panama Papers, dated back decades and involved billions of dollars in client transactions. The firm ultimately shut down.

Multiple Meetings

Members of the J5, which formed in 2018, have met several times to fight international tax crime and money laundering. In November, the group said it identified dozens of potential cryptocurrency tax evaders and cyber criminals as part of its joint efforts.

The international coordination comes as the IRS has begun hiring new criminal agents after several years of declining personnel and shrinking caseloads. Fort has emphasized increased use of technology, better targeting of enforcement and more work with partners overseas.

“The level of coordination seems to be unprecedented,” said Jeff Neiman, a former federal prosecutor. “If the barriers to international information sharing are truly coming down, investigations will turn into indictments much quicker.”

The investigation began with information obtained by the Netherlands, according to the J5 statement.

“This is the first outcome of an operational collaboration between five countries on tackling professional enablers that facilitate offshore tax crime,” said Hans van der Vlist, chief and general director of Fiscal Information and Investigation Service (FIOD) in the Netherlands.

To contact the reporters on this story: Laura Davison in Washington at ldavison4@bloomberg.net;David Voreacos in New York at dvoreacos@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Steve Geimann

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