As long as there have been taxes, there have been tax dodgers. And as long as there have been tax dodgers, there have been tax havens. These tax free countries can provide great tribulations to fraud investigators. However, tax havens can be deciphered by the savvy investigator. With patience, creativity and sound investigation tactics, fraud can be revealed even in the nations who maintain tax free statuses and banking secrecy.
Not every nation holds the same values regarding taxation and pubic investment. Frequently, smaller nations will use tax incentives as a method to entice foreign investment. If corporate tax statutes are more favorable in one of these havens, then large multinational corporations may develop facilities in the country where they most likely would not have without the incentives. Corporations are not the only targets; multiple nations may also offer no personal income taxes and benefits to wealthy private individuals. Some nations are very forthcoming and proudly advertise the tax advantages of living there; meanwhile, other states are far more discreet. A few of the most notable tax free havens include the Cook Islands, the Cayman Islands, Brunei, Dubai, and Andorra. No matter the intent of their taxation policy, these policies attract fraudsters hoping to enjoy the fruits of their schemes; Ponzi scheme creators and other large-scale fraudsters routinely use offshore havens to pull off their shell games and move their ill-gotten gains.
Consider the example of Robert Allen Stanford. Stanford inherited a legitimate insurance company based in Houston, Texas; when he branched out into banking fraud, Stanford relocated to the Caribbean island of Antigua. Taking advantage of secrecy laws and outright bribery, Stanford cheated investors out of $7 billion by selling phony certificates of deposit.
Luckily for investigators, banking secrecy is not what it used to be. Cracks in the wall of banking secrecy have surfaced primarily due to the revision of Mutual Legal Assistance Treaties (MLAT). As a result of these treaties, Western countries have been able to assert greater pressure on banking havens to unlock banking secrecy. Now, a capable trustee and investigator can find monies and recover them almost anywhere in the world, even in the revered Swiss banks. In some cases it is actually easier to find assets abroad than in the United States, considering the tremendous transaction data that must be sifted through in banking centers like London and New York City. Like any other fraud investigation, good intelligence and financial documents continue to be the keys to successful investigation outcomes.
Using local support is another decisive aspect for fraud investigators to undertake in these havens. Typically, this support comes in the form of legal counsel, but it can also include collaboration with local investigators, language translators, and friendly business partners. Local advocates can not only explain the local laws and customs, but they can provide strategies for breaking through the complexity of regulation that now appears in civil code. There are always strategies to use to successfully pursue assets even in the greatest of the so-called banking havens. Local support can provide an efficient means to quicken the process and bring about advantageous results.
Legal support should also be acquired and implemented in nations beyond the tax free nation. There have been several instances where Cook Islands-based trusts were successfully invalidated by foreign judges and barristers. In places such as Australia and the United States, there are actually legal firms who specialize in going after trusts that are based there. Applying proper political pressure- especially with key trade partner nations associated with the tax-free area- can alleviate much of the difficulties found in secrecy laws.
Fraud investigators must deal with difficulties and tribulations in any investigation, even in domestic cases. Dealing with international laws and customs may appear beyond their scope. But these international criminal investigations are not insurmountable; the same general principles apply in terms of conducting the inquiry. The differences lie in understanding different traditions and local customs, which can subtly alter the nature of how the investigation must be managed. With proper planning and due diligence, investigating crimes in tax free countries can be accomplished effectively and lucratively.
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