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Leak of 1.3 Million Files from Bahamas Corporate Registry Provides Yet Another Starting Point for Government Investigations

Five months after the Panama Papers leak of offshore client files, the International Consortium of Investigative Journalists (ICIJ) have released data from the corporate registry in the Bahamas pertaining to approximately 1.3 client million files. This information was originally leaked to of journalists at the German newspaper Süddeutche Zeitung, who reached out to the ICIJ to facilitate the public release of this information.

The Bahamas are yet another jurisdiction often referred to as a tax haven due to its secrecy laws and structuring possibilities attributable to the absence of taxes on company profits, capital gains, income and inheritance. The Bahamas claims to be a transparent jurisdiction with a public register of companies, but the information shared from the seat of government in Nassau is limited. Although the Bahamas Corporate Registry is supposed to contain the names and addresses of all directors and officers, there is no requirement to register the owners of a company with the authorities. Unlike the Cayman Islands and Jersey, the Bahamas has not responded to public pressure to introduce government-held registers of beneficial owners.

The leaked information contains the names of directors and some shareholders at nearly 176,000 shell companies, trusts and foundations registered between 1980 and 2016 in the Bahamas. Specifically, the data released include the leaked company’s name, its date of creation, the physical and mailing address in the Bahamas and, in some cases, the company’s directors.   The leaked documents also include the names of 539 registered agents, who served as intermediaries between Bahamian authorities and customers who wish to create an offshore company. Among them is Mossack Fonseca, the law firm whose leaked files formed the basis of the Panama Papers, which set up 15,915 entities in the Bahamas.

Because the secrecy laws in the Bahamas do not require information relating to beneficial owners, ICIJ noted that the information on the directors named in connection with a Bahamian firm may not “truly control the company or act as nominees, employees-for-hire who serve as the face of the company but have no involvement in its operations.” However, the ICIJ stated in its report that the data released involved the basic building blocks of offshore companies, which can be used by investigators as “starting points on the trail of wrongdoing.”

Those US persons who have not come into compliance with their US tax obligations have yet another incentive to seek legal counsel. Questions regarding this post or the IRS Offshore Voluntary Disclosure Programs can be sent to Jim Mastracchio (james.mastracchio@dentons.com) or Sunny Dhaliwal (sunny.dhaliwal@dentons.com).

Automatic Information Exchange: Did the Dog Just Catch the Bus?

John Harrington recently published an article in Tax Notes Today (available through the Lexis paywall) regarding eight potential challenges presented by an international automatic exchange system. 

On February 13, the OECD released details of its proposed common reporting standard, or CRS.  With the release of this report, the OECD and G-20, like the dog intent on catching a bus that it has long chased and finally caught, now have to figure out what do to with the prize they have captured.  Harrington discusses how an automatic information exchange could affect taxpayers, financial intermediaries, and governments.