Saturday, June 25, 2016

Analogic Subsidiary Agrees to Pay More than $14 Million to Resolve Bribery in Russia and Other Countries

A subsidiary of Massachusetts technology company Analogic Corporation entered into a non-prosecution agreement and agreed to pay a $3.4 million penalty today to resolve the government’s investigation into improper payments made in Russia and elsewhere in violation of the Foreign Corrupt Practices Act (FCPA), announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Carmen M. Ortiz of the District of Massachusetts. 

According to admissions made in the resolution documents, BK Medical ApS, a manufacturer of ultrasound equipment headquartered in Denmark, engaged in a scheme with its FBISealdistributor in Russia to make improper payments to third parties using fictitious invoices, falsely book those third-party payments and cause Analogic to falsify its books and records.  BK Medical admitted that, as part of the scheme, after the terms of a sale had been agreed upon, the distributor requested that BK Medical issue invoices that falsely inflated the sales price on the equipment.  The distributor then overpaid BK Medical the inflated amount and BK Medical transferred the excess funds to third parties as directed by the distributor, the company admitted.  BK Medical had no legitimate business relationship with those third parties and had not conducted due diligence on them, it admitted.  According to admissions in the resolution documents, at least some of these payments ultimately went to doctors employed by Russian state-owned entities.  Although the scheme involving its Russian distributor was the most extensive, BK Medical also admitted that it engaged in similar schemes with distributors in five other countries.  BK Medical admitted that its conduct – creating and maintaining these fictitious invoices, representing to Analogic that BK Medical was complying with all Analogic accounting policies and signing Sarbanes-Oxley subcertifications – caused Analogic to falsify its books, records and accounts in violation of the FCPA.   

As part of the non-prosecution agreement, BK Medical has agreed to pay the criminal penalty, to continue to cooperate with the department and with foreign authorities in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to periodically report to the department on the implementation of its enhanced compliance program.  The department reached this resolution based on a number of factors.  Among other factors, BK Medical received credit for its self-disclosure and its remediation, including terminating the officers and employees responsible for the corrupt payments.  It received partial credit for cooperation because, as described in the non-prosecution agreement, it did not initially disclose certain relevant facts that it learned in the course of its internal investigation.  Otherwise, by the conclusion of the investigation, BK Medical had provided to the department all relevant facts known to it, including information about individuals involved in the FCPA misconduct. 

In a related matter, Analogic reached a settlement today with the U.S. Securities and Exchange Commission (SEC) under which it agreed to pay $7,672,651 in disgorgement and $3,810,311 in prejudgment interest.  Download BK Medical Non-Prosecution Agreement

June 25, 2016 in AML | Permalink | Comments (0)

Friday, June 24, 2016

After UBS Produces Singapore-Based Documents, Justice Department Dismisses Summons Case

UBS AG has complied with an Internal Revenue Service (IRS) summons for bank records held in its Singapore office, the Irs_logo
Justice Department announced today.  Because UBS has now produced all Singapore-based records responsive to the request and the IRS determined that UBS complied with the summons, the Justice Department has voluntarily dismissed its summons enforcement action against the bank.

The IRS served an administrative summons on UBS for records pertaining to accounts held by Ching-Ye “Henry” Hsiaw.  According to the petition, the IRS needed the records in order to determine Hsiaw’s federal income tax liabilities for the years 2006 through 2011.  Hsiaw transferred funds from a Switzerland-based account with UBS to the UBS Singapore branch in 2002, according to the declaration of a revenue agent filed at the same time as the petition.  UBS refused to produce the records, and the United States filed its petition to enforce the summons.

“The Department of Justice and the IRS are committed to making sure that offshore tax evasion is detected and dealt with appropriately,” said Acting Assistant Attorney General Caroline D. Ciraolo of the Tax Division.  “One critical component of that effort is making sure that the IRS has all of the information it needs to audit taxpayers with offshore assets.  In this case, we filed a petition to enforce a summons for offshore documents, but that’s only one of the tools we have available for gathering information.  Taxpayers with offshore assets who underreported their income should come forward before we come looking for them.”


June 24, 2016 in FATCA | Permalink | Comments (0)

Corporate tax avoidance: Council agrees its stance on anti-avoidance rules

On 21 June 2016, the Council agreed on a draft directive addressing tax avoidance practices commonly used by large companies. The member states will have until 31 December 2018 to EU Commission transpose the directive into their national laws and regulations, except for the exit taxation rules, for which they will have until 31 December 2019. Member states that have targeted rules that are equally effective to the interest limitation rules may apply them until the OECD reaches agreement on a minimum standard or until 1 January 2024 at the latest.

The directive is part of a January 2016 package of Commission proposals to strengthen rules against corporate tax avoidance. The package builds on 2015 OECD recommendations to address tax base erosion and profit shifting (BEPS).

The directive addresses situations where corporate groups take advantage of disparities between national tax systems in order to reduce their overall tax liability. Corporate taxpayers may benefit from low tax rates or double tax deductions. Or they can ensure that categories of income remain untaxed by making it deductible in one jurisdiction whilst in the other it is not included in the tax base. The outcome distorts business decisions and risks creating situations of unfair tax competition.

New provisions in five areas

The draft directive covers all taxpayers that are subject to corporate tax in a member states, including subsidiaries of companies based in third countries. It lays down anti-tax-avoidance rules in five specific fields:

Interest limitation rules. Multinational groups may finance group entities in high-tax jurisdictions through debt, and arrange that they pay back inflated interest to subsidiaries resident in low-tax jurisdictions. The outcome is a reduced tax liability for the group as a whole. The draft directive sets out to discourage this practice by limiting the amount of interest that the taxpayer is entitled to deduct in a tax year.

Exit taxation rules. Corporate taxpayers may try to reduce their tax bill by moving their tax residence and/or assets to a low-tax jurisdiction. Exit taxation prevents tax base erosion in the state of origin when assets that incorporate unrealised underlying gains are transferred, without a change of ownership, out of the taxing jurisdiction of that state.

General anti-abuse rule. This rule is intended to cover gaps that may exist in a country's specific anti-abuse rules. Corporate tax planning schemes can be very elaborate and tax legislation doesn't usually evolve fast enough to include all the necessary defences. A general anti-abuse rule therefore enables tax authorities to deny taxpayers the benefit of abusive tax arrangements.

Controlled foreign company (CFC) rules. In order to reduce their overall tax liability, corporate groups can shift large amounts of profits towards controlled subsidiaries in low-tax jurisdictions. A common scheme consists of first transferring ownership of intangible assets such as intellectual property to the CFC and then shifting royalty payments. CFC rules reattribute the income of a low-taxed controlled foreign subsidiary to its - usually more highly taxed - parent company.

Rules on hybrid mismatches. Corporate taxpayers may take advantage of disparities between national tax systems in order to reduce their overall tax liability. Such mismatches often lead to double deductions (i.e. tax deductions in both countries) or adeduction of the income in one country without its inclusion in the other.

For more information:

Proposal on anti-tax avoidance measures

Anti-Tax Avoidance Package

Memo on the Anti-Tax Avoidance Package

Study on Structures of Aggressive Tax Planning and Indicators

Action Plan for Fair and Efficient Corporate Taxation in the EU

June 24, 2016 in BEPS | Permalink | Comments (0)

Canadian Revenue Pursues Panama Papers Info Through Treaty Requests and Whistleblower Payments

Excerpt from Canada Revenue statement regarding its investigation of persons named in the Panama Papers:

The CRA Canada-revenue-agencycontinues to pursue audits related to offshore tax evasion including some Canadian clients associated with law firm Mossack Fonseca.  The Agency is actively pursuing the cooperation of its tax treaty partners and the International Consortium of Investigative Journalists to obtain all of the leaked records that pertain to Canadian residents.

Since 2015, the CRA has collected data on international funds transfers, and is actively identifying high risk taxpayers, high risk jurisdictions, and high risk intermediaries.

The Minister of National Revenue has instructed CRA officials to obtain the data leaked through the Panama Papers in order to cross-reference this information with the data already obtained through the Agency’s existing investigation tools. The CRA will be communicating with its treaty partners to obtain any further information that may not currently be in its possession. We will continue to analyze relevant information from all sources to identify Canadian taxpayers who may have used accounts to hide or conceal money offshore in an effort to avoid or evade paying tax.

Compliance actions are being taken according to the information available in each case, including referrals to the CRA’s Criminal Investigations Directorate and, where appropriate, the Public Prosecution Services of Canada for possible criminal prosecution.

International tax evasion and aggressive tax avoidance are complex global issues. Budget 2016 allocated over $440M for the CRA to combat tax evasion and aggressive tax avoidance, including offshore. This investment enhances the effective tools the CRA already has to detect offshore non-compliance, including access to international Electronic Funds Transfers, information from the Offshore Tax Informant Program (OTIP) and exchanges with treaty partners.

Since January 2015, the CRA has collected information on all international funds transfers over $10,000, including those to Panama and other jurisdictions of concern.

OTIP allows the CRA to pay individuals who confidentially provide specific information about major international tax non-compliance. If the CRA collects more than $100,000 in federal taxes resulting from this information, the person who provided it could be awarded between 5% and 15% of the amount collected. Since the program started in January 2014, it has received calls from over 800 individuals and is reviewing over 120 cases.

Information sharing and international cooperation are key to deterring international tax evasion and avoidance, and identifying tax non-compliance and abuse. Canada has one of the most extensive tax treaty networks in the world, with 92 tax treaties and 22 Tax Information Exchange Agreements (TIEAs) in force as ofApril 4, 2016.  Treaties and TIEAs are important tools that enhance Canada's ability to obtain information to enforce our laws and to see that all Canadians, including those with operations and investments abroad, pay their appropriate share of taxes.

June 24, 2016 in GATCA, Tax Compliance | Permalink | Comments (0)

Pension fund investments down slightly in 2015, Returns Low

The OECD's preliminary data for 2015 show that aggregated pension fund investments in the OECD area total USD 24.8 trillion, down slightly on the 2014 total of USD 25.2 trillion in OECDPension Markets in Focus (see Table 1).

The OECD analyzed that "the relative fall of pension fund investments may be explained by low real net investment returns in 2015, coupled with the strengthening of the US dollar vis-à-vis other major currencies". 

Find all the OECD Pension Markets data here.

June 24, 2016 in Economics | Permalink | Comments (0)

Thursday, June 23, 2016

Former Swiss Banker Pleads Guilty to Conspiring with U.S. Taxpayers and Other Swiss Bankers

A former Credit Suisse AG banker, who has been a fugitive since 2011, pleaded guilty today in U.S. District Court in the Irs_logoEastern District of Virginia to charges related to aiding and assisting U.S. taxpayers in evading their income taxes, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia.

Michele Bergantino, 48, a citizen of Italy and a resident of Switzerland, pleaded guilty before U.S. District Judge Gerald Bruce Lee to conspiring to defraud the United States by assisting U.S. taxpayers to conceal foreign accounts and evade U.S. tax during his employment as a banker working for Credit Suisse AG on its North American desk.

“Mr. Bergantino is now the third fugitive to come to the United States and plead guilty to charges in this case,” said Acting Assistant Attorney General Ciraolo. “To those who have actively assisted U.S. taxpayers in using offshore accounts to evade taxes, the message is clear:  staying outside the United States will provide little comfort.  We will investigate and charge you, and will work relentlessly to hold you to account for your actions.”

Bergantino admitted that from 2002 to 2009, while working as a relationship manager for Credit Suisse in Switzerland, he participated in a wide-ranging conspiracy to aid and assist U.S. taxpayers in evading their income taxes by concealing assets and income in secret Swiss bank accounts.  Bergantino oversaw a portfolio of accounts, largely owned by U.S. taxpayers residing on the West Coast, which grew to approximately $700 million of assets under management.  Bergantino admitted that the tax loss associated with his criminal conduct was more than $1.5 million but less than or equal to $3.5 million.  

During his time as a relationship manager, Bergantino assisted many U.S. clients in utilizing their Credit Suisse accounts to evade their U.S. income taxes and to facilitate concealment of the U.S clients’ undeclared financial accounts from the U.S. Treasury Department and the Internal Revenue Service (IRS).  Among the steps taken by Bergantino to assist clients in hiding their Swiss accounts were the following:  assuring them that Swiss bank secrecy laws would prevent Credit Suisse from disclosing their undeclared accounts to U.S. law enforcement; discussing business with clients only when they traveled to Zurich to meet him; structuring withdrawals from their undeclared accounts by sending multiple checks, each in amounts below $10,000, to clients in the United States; facilitating the withdrawal of large sums of cash by U.S. customers from their Credit Suisse accounts at Credit Suisse offices in the Bahamas, in Switzerland, particularly the Credit Suisse branch at the Zurich airport and at a financial institution in the United Kingdom; holding clients’ mail from delivery to the United States; issuing withdrawal checks from Credit Suisse’s correspondent bank in the United States; and taking actions to remove evidence of a U.S. client’s control over an account because the U.S. client intended to file a false and fraudulent income tax return.  Moreover, Bergantino understood that a number of his U.S. clients concealed their ownership and control of foreign financial accounts by holding those accounts in the names of nominee tax haven entities, or structures, which were frequently created in the form of foreign partnerships, trusts, corporations or foundations. 

Bergantino also admitted traveling to the United States approximately one to two times a year to meet with clients, taking careful steps to conceal the purpose of his visits from U.S. law enforcement.  He used private couriers to send clients’ account statements to the U.S. hotels where he stayed, so that he would not be caught traveling with clients’ statements in his possession.  In addition, Bergantino obtained “travel” account statements for each client he intended to visit which were devoid of Credit Suisse’s logo and account or customer identification information and used business cards that Credit Suisse provided that contained only his name and office number and did not carry the Credit Suisse name or logo.  On entering the United States, Bergantino provided misleading information regarding the nature and purpose of his visit to U.S. Customs and Border Protection authorities.

In addition to assisting customers in evading their U.S. taxes, Bergantino also provided illegal advice to U.S. customers regarding investments in U.S. securities.  Neither Bergantino nor Credit Suisse were registered with the U.S. Securities and Exchange Commission and both U.S. law and Credit Suisse policy prohibited Bergantino and other Credit Suisse employees from providing investment advice in the United States.  Nevertheless, Credit Suisse management pressured its employees, including Bergantino, to make sales in the United States.

Two of Bergantino’s co-defendants, Andreas Bachmann and Josef Dörig, pleaded guilty to the superseding indictment in 2014 and were sentenced on March 27, 2015.  Credit Suisse pleaded guilty in May 2014 for conspiring to aid and assist taxpayers in filing false returns and was sentenced in November 2014 to pay $2.6 billion in fines and restitution.

Bergantino faces a statutory maximum sentence of five years in prison.  He also faces monetary penalties and restitution.

June 23, 2016 in FATCA | Permalink | Comments (0)

U.S. Navy Admiral Pleads Guilty to Lying to Federal Investigators about His Relationship with Foreign Defense Contractor in Massive Navy Bribery and Fraud Investigation

U.S. Navy Rear Admiral Robert Gilbeau pleaded guilty today in federal court to charges that he lied to federal investigators to conceal his illicit years-long relationship with Leonard Glenn Francis, owner of Glenn Defense Marine Asia (GDMA), the foreign defense contractor at the center of a massive bribery and fraud scandal.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Laura E. Duffy of the Southern District of California, Acting Director Navy Crim Investigative ServiceDermot O’Reilly of the Department of Defense’s (DOD) Defense Criminal Investigative Service (DCIS), Director Andrew Traver of the Naval Criminal Investigative Service (NCIS) and Director Anita Bales of Defense Contract Audit Agency (DCAA) made the announcement.

Gilbeau, 55, of Burke, Virginia, pleaded guilty to one count of making a false statement.  He was charged by information today and is the highest-ranking U.S. Navy officer to be charged in the investigation so far.  Gilbeau is scheduled to be sentenced on Aug. 26, 2016, before U.S. District Judge Janis L. Sammartino of the Southern District of California. 

In his plea agreement, Gilbeau admitted that he lied when he told agents from DCIS and NCIS that he had never received any gifts from Francis, the owner of Singapore-based GDMA.  Gilbeau also admitted that he lied when he told investigators that he “always paid for half of the dinner” when he and Francis met about three times a year.  Gilbeau further admitted that when he became aware that Francis and others had been arrested in connection with the fraud and bribery offenses in September 2013, he destroyed documents and deleted computer files.  Francis previously pleaded guilty to plying scores of other U.S. Navy officials with gifts such as luxury travel, meals, cash, electronics, parties and prostitutes.

According to his plea, in 2003 and 2004, Gilbeau was the supply officer on the USS Nimitz, where he was responsible for procuring all goods and services necessary for operation of the ship.  He later served as head of the Tsunami Relief Crisis Action Team in Singapore, heading the Navy’s logistics response to the Southeast Asia tsunami in December 2004, and in June 2005, Gilbeau was assigned to the office of the Chief of Naval Operations as the head of aviation material support, establishing policies and requirements for budgeting and acquisitions for the Navy’s air forces, according to the plea agreement.

In August 2010, after he was promoted to admiral, Gilbeau assumed command of the Defense Contract Management Agency International, where he was responsible for the global administration of DOD’s most critical contracts performed outside the United States, according to admissions made in connection with his plea.

“As a flag level officer in the U.S. Navy, Admiral Gilbeau understood his duty to be honest with the federal agents investigating this sprawling bribery scheme,” said Assistant Attorney General Caldwell.  “By destroying documents and lying about the gifts that he received, Admiral Gilbeau broke the law and dishonored his uniform.”

“Of those who wear our nation’s uniform in the service of our country, only a select few have been honored to hold the rank of Admiral – and not a single one is above the law,” said U.S. Attorney Laura Duffy.  “Admiral Gilbeau lied to federal agents investigating corruption and fraud, and then tried to cover up his deception by destroying documents and files.  Whether the evidence leads us to a civilian, to an enlisted service member or to an admiral, as this investigation expands we will continue to hold responsible all those who lied or who corruptly betrayed their public duties for personal gain.”

“The guilty plea of Rear Admiral Robert Gilbeau is an unfortunate example of a dishonorable naval flag officer who has betrayed his shipmates, the U.S. Navy and his country,” said Acting Director O’Reilly.  “Admiral Gilbeau's guilty plea should be a resounding message that DCIS, Naval Criminal Investigative Service and the Department of Justice will continue to investigate and seek to prosecute any individual, regardless of position or rank, who would put our mission of ‘Protecting America’s Warfighters’ at risk.”

“This investigation demonstrates that corruption, conspiracy and the release of sensitive information puts Department of the Navy personnel and resources at risk,” said Director Traver.  “And in concert with our partner agencies, NCIS remains resolved to follow the evidence, to help hold accountable those who make personal reward a higher priority than professional responsibility.”

“DCAA is proud to stand in partnership with our law enforcement allies and make a meaningful contribution to the outcome in this egregious case,” said Director Bales.  “It is very disappointing that this high-ranking individual lost sight of his responsibility as a government official.  We look forward to continuing our support of this significant investigation.”

Including Gilbeau, 14 individuals have been charged in connection with this scheme; of those, nine have pleaded guilty, including U.S. Navy Captain (Select) Michael Misiewicz, U.S. Navy Capt. Daniel Dusek, Lieutenant Commander Todd Malaki, NCIS Special Agent John Beliveau, Commander Jose Luis Sanchez and U.S. Navy Petty Officer First Class Dan Layug.  Former Department of Defense Senior Executive Paul Simpkins awaits trial.  On Jan. 21, 2016, Layug was sentenced to 27 months in prison and a $15,000 fine; on Jan. 29, 2016, Malaki was sentenced to 40 months in prison and to pay $15,000 in restitution to the Navy and a $15,000 fine; on March 18, 2016, Alex Wisidagama, a former GDMA employee, was sentenced to 63 months and to pay $34.8 million in restitution to the Navy; on March 25, 2016, Dusek was sentenced to 46 months in prison and to pay $30,000 in restitution to the Navy and a $70,000 fine; and on April 29, 2016, Misiewicz was sentenced to 78 months in prison and to pay a fine of $100,000 and to forfeit $95,000 in proceeds for the scheme.  Retired Navy Captain Michael Brooks, Commander Bobby Pitts and Lieutenant Commander Gentry Debord were charged by a federal grand jury on May 25, 2016, and their cases remain pending.  GDMA, the corporate entity, was also charged and has pleaded guilty.  Francis and Ed Aruffo, a former GDMA employee, have both pleaded guilty and await sentencing.

NCIS, DCIS and DCAA are conducting the investigation.  Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California are prosecuting the case. 

June 23, 2016 in AML | Permalink | Comments (0)

MassMutual Settles 401(k) Fee Lawsuit for $31M

Bloomberg reported that  - Massachusetts Mutual Life Insurance Co. will pay nearly $31 million to settle a lawsuit claiming that it mismanaged its 401(k) plan ...  The lawsuit alleged that MassMutual and its top executives “larded” the company's retirement plan with “excessive fees” and “unreasonably priced, proprietary investment options” in violation of their fiduciary duties under the Employee Retirement Income Security Act.  Read the full Bloomberg story and analysis of this MassMutual case here.

June 23, 2016 in Financial Regulation | Permalink | Comments (0)

Wednesday, June 22, 2016

Congressman convicted for Corruption and Money Laundering

The political media site The Hill reported that Democrat Pennsylvania Congressperson Chaka Fattah has been convicted by a jury of all charges in a federal corruption trial related to FBISealcounts of bribery, money laundering, fraud and racketeering.  Read The Hill's story here.

Local Philly news coverage here.

The FBI stated that Congressman Chaka Fattah Sr.  of Philadelphia; lobbyist Herbert Vederman of Palm Beach, Florida; Fattah’s Congressional District Director Bonnie Bowser of Philadelphia; and Robert Brand of Philadelphia; and Karen Nicholas, of Williamstown, New Jersey, had been charged were charged July 29, 2015 today in a 29-count indictment with participating in a racketeering conspiracy and other crimes, including bribery; conspiracy to commit mail, wire and honest services fraud; and multiple counts of mail fraud, falsification of records, bank fraud, making false statements to a financial institution and money laundering.

Specifically, the indictment alleges that, in connection with his failed 2007 campaign to serve as mayor of Philadelphia, Fattah and certain associates borrowed $1 million from a wealthy supporter and disguised the funds as a loan to a consulting company. After he lost the election, Fattah allegedly returned $400,000 to the donor that the campaign had not used, and arranged for Educational Advancement Alliance (EAA), a non-profit entity that he founded and controlled, to repay the remaining $600,000 using charitable and federal grant funds that passed through two other companies, including one run by Brand. To conceal the contribution and repayment scheme, the defendants and others allegedly created sham contracts and made false entries in accounting records, tax returns and campaign finance disclosure statements.

In addition, the indictment alleges that after his defeat in the mayoral election, Fattah sought to extinguish approximately $130,000 in campaign debt owed to a political consultant by agreeing to arrange for the award of federal grant funds to the consultant. According to the allegations in the indictment, Fattah directed the consultant to apply for a $15 million grant, which he did not ultimately receive, on behalf of a then non-existent non-profit entity. In exchange for Fattah’s efforts to arrange the award of the funds to the non-profit, the consultant allegedly agreed to forgive the debt owed by the campaign.

The indictment further alleges that Fattah misappropriated funds from his mayoral and congressional campaigns to repay his son’s student loan debt. To execute the scheme, Fattah and Bowser allegedly arranged for his campaigns to make payments to a political consulting company, which the company then used to lessen Fattah’s son’s student loan debt. According to the allegations in the indictment, between 2007 and 2011, the consultant made 34 successful loan payments on behalf of Fattah’s son, totaling approximately $23,000.

In another alleged scheme, beginning in 2008, Fattah communicated with individuals in the legislative and executive branches in an effort to secure for Vederman an ambassadorship or an appointment to the U.S. Trade Commission. In exchange, Vederman provided money and other items of value to Fattah. As part of this scheme, the indictment alleges that the defendants sought to conceal an $18,000 bribe payment from Vederman to Fattah by disguising it as a payment for a car sale that never actually took place.

Finally, the indictment alleges that Nicholas obtained $50,000 in federal grant funds that she claimed would be used by EAA to support a conference on higher education. The conference never took place. Instead, Nicholas used the grant funds to pay $20,000 to a political consultant and $10,000 to her attorney, and wrote several checks to herself from EAA’s operating account.

Fattah, Robert Brand, 70, of Philadelphia; Karen Nicholas, 58, of Williamstown, New Jersey; and Herbert Vederman, 70, of Palm Beach, Florida, were found guilty of participating in a racketeering conspiracy.  Fattah was also found guilty of conspiracy to commit bribery, bribery, conspiracy to commit wire fraud, conspiracy to commit honest services fraud, mail fraud, money laundering conspiracy, money laundering, bank fraud, false statements to a financial institution, six counts of mail fraud and five counts of falsification of records.

Vederman was also convicted of conspiracy to commit bribery, bribery, bank fraud, making false statements to the Credit Union Mortgage Association, falsification of records and two counts of money laundering.

Brand was also convicted of conspiracy to commit wire fraud.

Nicholas was also convicted of conspiracy to commit wire fraud, two counts of wire fraud and two counts of falsification of records.

June 22, 2016 in AML | Permalink | Comments (0)

Hillary Clinton DNC Documents Posted on Web by Hacker

See Guccifer2.0 blog wherein he posts many DNC leaked documents regarding Hillary Clinton.  What will he (or "they") post next?

June 22, 2016 | Permalink | Comments (0)

Tuesday, June 21, 2016

Prof. Sahar Aziz Explains the Current Egypt Prosecutions of Journalists and Former President Morsi

Professor Sahar Aziz of Texas A&M University School of Law explains the current Egyptian government's stance toward journalists and toward Mohamed Morsi, the former President. Aziz-sahar-head-shot-story-bodyProf. Aziz teaches national security and Middle East law.

>> Al Jazeera news video here <<

CNN recently interviewed Prof. Sahar Aziz as one of the most influential women voices in America, along with Donna Brazile and Gloria Steinem about the Democratic party's nomination of Hillary Clinton.  CNN interview of America's most influential commentators on gender issues here

June 21, 2016 in World Bank | Permalink | Comments (0)

IRS Releases Revised 2016 W-8BEN-E and Accompanying Instructions

IRS Releases Revised 2016 W-8BEN-E and Accompanying Instructions

Analysis of the New 2016 W-8BEN-E and Accompanying Instructions

William Byrnes and Haydon Perryman

This month we turn our attention to the recently revised 2016 W-8BEN-E form which has 30 parts over eight pages that can be catalogued into four sections. The IRS released its FATCA_rollprevious substantial update of the W-8BEN-E in February 2014 and in April 2016 its most recent revisionary updated form with accompanying updated instructions.  The 2016 revision more represents a technical correction release for the evolution of FATCA and its IGAs since 2014 than substantive changes.   The 2014 W-8 series update, on the other hand, was a major departure from the previous series, exemplified by the former W-8BEN in use since 2006 had just four parts.   The 2014 Forms may continue to be used by institutions until October 2016 when it becomes mandatory to switch to the new 2016 W-8BEN-E.  For a detailed FATCA evolution from pre-2010 through 2016, download my 118 page article.

Most Important Updates

This new 2016 W-8BEN-E includes three primary amendments.

Inclusion of Limitation of Benefits Categories

Firstly, the new W-8BEN-E contains 10 new potential items for selection to comply with a “Limitation of Benefits” (LOB) article of a double tax agreement to receive the advantages of the agreements reduced withholding provision. These new LOB boxes reside within Part III - Claim of Tax Treaty Benefits, Line 14.  The items include the nine main tests that can be met to satisfy an LOB provision, and then includes a tenth “Other” catch-all category that requires the filer cite to the treaty article and paragraph number test not covered within the nine categories. 

Moreover, line 15 requires further explanation be provided of how additional conditions are met to qualify for any further exceptional reduction of withholding.  Line 15 must be used only if claiming treaty benefits that require that meeting conditions not already covered by the representations of line 14 (or other certifications on the form).

This line is generally not applicable to claiming treaty benefits under an interest or dividends (other than dividends subject to a preferential rate based on ownership) article of a treaty or other income article, unless such article requires additional representations. For example, certain treaties allow for a zero rate on dividends for certain qualified residents provided that additional requirements are met, such as ownership percentage, ownership period, and that the resident meet a combination of tests under an applicable LOB article.

New FATCA Category for Non-Financial Accounts

Secondly, a new checkbox has been added to the chapter 4 statuses in line 5 for payments made to payees for accounts they hold that are not financial accounts under the FATCA regulations [section 1.1471-5(b)(2)]. See Chapter 7A of the Guide to FATCA Compliance for a detailed analysis of this topic.

Coordination with IGAs

Finally, the new W-8BEN-E instructions are amended to coordinate qualification for the status of a nonreporting FFI under the IGA with a deemed-compliant FFI status under the chapter 4 regulations. An FFI that meets the requirements of both a nonreporting IGA FFI under the IGA and under the regulations should certify as a nonreporting IGA FFI, unless such entity meets the requirements for owner-documented FFI status for payments associated with this form, in which case it should certify to that status under the regulations only by completing Part X of the form.

The W-8BEN-E Structure

The filer’s primary focus will be on Part I.   

Identifying Information and Choice of Classification part: All filers of the W-8BEN-E must complete Parts I (Identifying Information and FATCA Classification). Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer. Question 4 of Part I requests the QI status. If the filer is a disregarded entity, partnership, simple trust, or grantor trust, and also is claiming benefits under a U.S. tax treaty, then the filer must complete Part III. Part I, Question 5 requests the FATCA classification of the filer, of which the form list 31 choices. The classification indicated determines which one of the parts IV through XXVIII must be completed.

General Certification part: All filers must complete Part XXX (General Certification). Part XXX requires certification, under penalty of perjury, by the payee or a person authorized to sign on the payee’s behalf. This part of the final form also requires the signatory agree that she will submit a new form within 30 days if any certification made on this form becomes incorrect.

The signatory is certifying, subject to perjury:  

The entity identified on line 1 of this form is the beneficial owner of all the income to which this form relates, is using this form to certify its status for chapter 4 purposes, … 

  • The entity identified on line 1 of this form is not a U.S. person, 
  • The income to which this form relates is: (a) not effectively connected with the conduct of a trade or business in the United States, (b) effectively connected but is not subject to tax under an income tax treaty, or (c) the partner’s share of a partnership's effectively connected income, and 
  • For broker transactions or barter exchanges, the beneficial owner is an exempt foreign person as defined in the instructions.

Moreover, Line XXIX for identification of substantial U.S. owners is subject to the same perjury statement and other certifications made in Part XXX.

Specific Certification of FATCA Classification part: Completion of the other parts of the form W-8BEN-E will depend upon the Part I, Question 5 FATCA classification of the filer.

Substantial U.S. Owner part: The information required to answer this line may be attached to the form in a separate statement, which remains subject to the same perjury statement and other certifications made in part XXX.  A filer that is a passive NFFE and thus completes part XXVI must also complete as well as part XXIX if it has substantial U.S. owners.

For a Passive NFFE, a specified U.S. person is a substantial U.S. owner if the person has more than a 10 percent beneficial interest in the entity.  But if an applicable IGA instead employs the standard of “controlling U.S. persons”, then the filer must look to the definition of a controlling person within the IGA of the jurisdiction of the financial institution to which the W-8BEN-E is provided.

Who Must Provide the W-8BEN-E?

A foreign entity must submit a Form W-8BEN-E to the withholding agent if it will receive a FATCA withholdable payment, receive a payment subject to chapter 3 withholding, or if it maintains an account with an FFI.

Disregarded Entity

A disregarded entity with a U.S. owner or a disregarded entity with a foreign owner that is not otherwise able to fill out Part II (i.e., because it is in the same country as its single owner and does not have a GIIN) may provide this form to an FFI solely for purposes of documenting itself for chapter 4 purposes. In such a case, the disregarded entity should complete Part I as if it were a beneficial owner and should not complete line 3.

Beneficial Owners

Form W-8 BEN-E must be provided by each of the entities that are beneficial owners of a payment, or of another entity that is a beneficial owner. If the income or account is jointly owned by more than one person, then the income or account will be treated by the withholding agent as owned by a foreign beneficial owner only if Forms W-8BEN or W-8BEN-E are provided by each owner of the account.

Treatment as a U.S. Account

If the withholding agent or financial institution receives a Form W-9 from any of the joint owners, then the payment must be treated as made to a U.S. person and the account treated as a U.S. account. An account will be treated as a U.S. account for FATCA by an FFI if any of the account holders is a specified U.S. person or a U.S.-owned foreign entity, unless the account is otherwise excepted from U.S. account status for FATCA purposes.

Expiration of Form W-8 BEN-E

Generally, a Form W-8BEN-E will remain valid for purposes of both chapters 3 and 4 for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year, unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on September 30, 2014 remains valid through December 31, 2017. However, under certain conditions, a Form W-8BEN-E will remain in effect indefinitely until a change of circumstances occurs.

Change in Circumstances

If a change in circumstances makes any information on the Form W-8 BEN-E incorrect for purposes of either chapter 3 or chapter 4, then the submitting person must notify the withholding agent or financial institution maintaining the account within 30 days of the change in circumstances and must file a new Form W-8 BEN-E (or other appropriate form as applicable).

The new 2016 instructions point out that if the submitter has relied upon an IGA to respond to the form, and the country is thereafter removed from the U.S. Treasury list of current IGAs, then from the date of removal a ‘change of circumstances’ has occurred.  The W-8BEN-E will no longer be ‘fit for purpose’ after the expiration of the change of circumstance time frame. 

Which of the 30 Parts of the W-8BEN-E to Complete?

The 2014 and 2016 W-8BEN-E form has thirty parts presented over eight pages, whereas the former 2006 dual-purpose W8BEN had just four parts.  The 2016 Form W-8BEN-E, and did the 2014 version, includes both the QI (U.S. IRC Title III) and the FATCA (U.S. IRC Title IV) entity classification reporting requirements.

All filers of the W-8BEN-E must complete Parts I and XXX. The FATCA classification indicated determines which one of the Parts IV through XXVIII must be completed, and whether substantial U.S. owners must be identified under part XXIX.


Part I – Identification of Beneficial Owner

Part I of the W-8BEN-E requires general information, the QI status, and the FATCA classification of the filer.


Line 1. A disregarded entity or branch enters the legal name of the entity that owns the disregarded entity (looking through multiple disregarded entities if applicable) or maintains the branch.

Line 2. A corporation must enter its country of incorporation.  Any other type of entity must instead enter the country under whose laws it is created, organized, or governed.

Line 3. A disregarded entity receiving a payment should only enter its name on line 3 if it is receiving a withholdable payment or hold an account with an FFI and

  1. has registered with the IRS and been assigned a GIIN associated with the legal name of the disregarded entity;
  2. is a reporting Model 1 FFI or reporting Model 2 FFI; and
  3. is not a hybrid entity using this form to claim treaty benefits.

If not required to provide the legal name, then a disregarded entity receiving a payment or maintaining an account may instead enter its name on line 3.

Line 4 firstly requests the Chapter 3 status of the recipient for purposes of U.S. withholding on U.S. source income.  Question 4 formerly presented 11 entity types from which the filer may select one. The 2016 W-8BEN-E includes a new entity type, the “International Organization” and thus 12 choices.

Secondly, if the filer is a disregarded entity, partnership, simple trust, or grantor trust, then the filer must tick in the affirmative and complete Part III if the entity is claiming benefits under a U.S. tax treaty.

Line 5 requests the FATCA classification of the entity.  The W-8BEN-E currently lists 32 FATCA classifications of which the entity should check only one box, whereas the previous list contained 31 classification choices.  The previous 2014 instructions also stated that only one box should be chosen but with a caveat “unless otherwise indicated”.  The 2016 W-8BEN-E instructions have been updated to state: “Check the one box that applies to your chapter 4 status.”  

Several of the 32 classifications have had internal language updates to better align with the regulations or deadlines that have passed since 2014.  By example, the classification choice of “Sponsored FFI” no longer has the reference “that has not obtained GIIN".  These modifications will be analyzed in depth in the Guide to FATCA Compliance

Account That is Not a Financial Account

However, noteworthy is the newly added thirty-second classification because it is causing some confusion among compliance officers.  It reads “Account That is Not a Financial Account”.  The line 5 instruction states that if the filer is merely providing this form to document an account held with a financial institution that is not a financial account under Regulations section 1.1471-5(b)(2), then check the “Account that is not a financial account” box on line 5. 

Why is this category necessary?  Because the regulations limit the scope of what types of financial institution accounts are included for the FATCA definition of financial account.  By example, the regulations exclude certain escrow accounts established for commercial transactions from treatment as financial accounts. The regulations also exclude negotiable debt instruments that are traded on a regulated market or over-the-counter market and distributed through financial institutions.  The regulations limit the scope of a depository account to an account for the placing of money (as opposed to the holding of property) in the custody of an entity engaged in a banking or similar business.

The regulations also exclude certain accounts of insurance companies.  By example, the regulations provide that a depository account includes an amount that an insurance company holds under a guaranteed investment contract or under a similar agreement to pay or credit interest thereon. The regulations also provide that a depository account does not include an advance premium or premium deposit received by an insurance company, provided the prepayment or deposit relates to an insurance contract for which the premium is payable annually and the amount of the prepayment or deposit does not exceed the annual premium for the contract. Such amounts are also excluded from cash value for purposes of determining whether a contract is a cash value insurance contract.

Comments On Completion of Part I, Line 5

Where one of the following FATCA classifications is selected, then the entity’s GIIN must be obtained (in Part 1 Line 9a) and verified against the IRS GIIN list. An incomplete or truncated TIN or GIIN may not be relied upon. It is acceptable for a limited time period that instead of providing a GIIN in Part 1 Line 9a to state “Applied for.”  However, the W8-BEN-E becomes invalid if the GIIN is not provided and verified against the IRS GIIN list within 90 days.

(a) Participating FFI;

(b) Reporting Model 1 FFI;

(c) Reporting Model 2 FFI;

(d) Registered deemed-compliant FFI (other than a reporting Model 1 FFI or sponsored FFI that has not obtained a GIIN);

(e) Nonreporting IGA FFI (including an FFI treated as a registered deemed-compliant FFI under an applicable Model 2 IGA);

(f) Direct reporting NFFE; or

(g) Sponsored direct reporting NFFE;

If the country entered in Part 1 Line 2 is an IGA country then the option of “Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a registered deemed-compliant FFI or participating FFI)” is not acceptable.

If the organization is a Financial Institution in the United States maintaining its customer’s account in the U.S., then it should collect its customer’s Foreign TIN in Part 1, Line 9b. In that scenario, the lack of a Foreign TIN makes the W8-BEN-E invalid.

It is the W8-BEN-E that will identify most of the Passive NFFEs. The identification of Passive NFFE is a key concept which runs consistently not only through the U.S. Treasury version of FATCA, but also the IGAs, the latest FINCEN proposal (RIN 1506-AB25 issued July 30, 2014) and the CRS.

Passive NFFEs identify themselves as such in Part 1 Line 5 of the W-8 BEN-E. Where an entity declares itself a Passive NFFE in Part 1 Line 5 of the W-8 BEN-E, it has to complete part XXVI. Passive NFFEs are unique in that they have to declare either their U.S. beneficial owners or controlling persons on the W-8 BEN-E for the declaration to be valid. For the avoidance of doubt, the 2016 W-8BEN-E specifically includes mention of the possibility of a applicable IGA: “If providing the form to an FFI treated as a reporting Model 1 FFI or reporting Model 2 FFI, an NFFE may also use this Part for reporting its controlling U.S. persons under an applicable IGA”.

In most IGA Model 1 countries the concept of beneficial ownership is replaced by the pre-existing KYC/AML in that particular jurisdiction. In general, the concept of beneficial ownership is replaced in IGA Model 1 countries by the concept of “controlling persons” who own or control 25 percent of the entity. More accurately, in an IGA Model 1 country the U.S. beneficial ownership concept is replaced by whatever the rules are under that jurisdiction’s KYC/AML. Generally, but not always, this will be the controlling persons of at least 25 percent.

Moreover, the CRS looks to the controlling person. The latest FinCEN proposal that establishes regulations for U.S. financial institutions to apply FATCA in the U.S. includes both the “controlling person” and the “beneficial owner” concepts (see my Kluwer International Tax article of May 9, 2016: The Brave New World of AML and Tax Compliance Overlap for Tax Status Certification for FATCA, CRS and the EU. Why are so many compliance officers getting it wrong?).

32 categories to choose one from

  1. Nonparticipating FFI (including a limited FFI or an FFI related to a Reporting IGA FFI other than a deemed-compliant FFI, participating FFI, or exempt beneficial owner).
  2. Participating FFI.
  3. Reporting Model 1 FFI.
  4. Reporting Model 2 FFI.
  5. Registered deemed-compliant FFI (other than a reporting Model 1 FFI, sponsored FFI, or nonreporting IGA FFI covered in Part XII). See instructions.
  6. Sponsored FFI. Complete Part IV.
  7. Certified deemed-compliant nonregistering local bank. Complete Part V.
  8. Certified deemed-compliant FFI with only low-value accounts. Complete Part VI.
  9. Certified deemed-compliant sponsored, closely held investment vehicle. Complete Part VII.
  10. Certified deemed-compliant limited life debt investment entity. Complete Part VIII.
  11. Certified deemed-compliant investment advisors and investment managers. Complete Part IX.
  12. Owner-documented FFI. Complete Part X.
  13. Restricted distributor. Complete Part XI.
  14. Nonreporting IGA FFI. Complete Part XII.
  15. Foreign government, government of a U.S. possession, or foreign central bank of issue. Complete Part XIII.
  16. International organization. Complete Part XIV.
  17. Exempt retirement plans. Complete Part XV.
  18. Entity wholly owned by exempt beneficial owners. Complete Part XVI.
  19. Territory financial institution. Complete Part XVII.
  20. Nonfinancial group entity. Complete Part XVIII.
  21. Excepted nonfinancial start-up company. Complete Part XIX.
  22. Excepted nonfinancial entity in liquidation or bankruptcy. Complete Part XX.
  23. 501(c) organization. Complete Part XXI.
  24. Nonprofit organization. Complete Part XXII.
  25. Publicly traded NFFE or NFFE affiliate of a publicly traded corporation. Complete Part XXIII.
  26. Excepted territory NFFE. Complete Part XXIV.
  27. Active NFFE. Complete Part XXV.
  28. Passive NFFE. Complete Part XXVI.
  29. Excepted inter-affiliate FFI. Complete Part XXVII.
  30. Direct reporting NFFE.
  31. Sponsored direct reporting NFFE. Complete Part XXVIII.
  32. Account that is not a financial account.

FFIs Covered by an IGA and Related Entities

A reporting IGA FFI resident in, or established under the laws of, a jurisdiction covered by a Model 1 IGA should check “Reporting Model 1 FFI.” A reporting FFI resident in, or established under the laws of, a jurisdiction covered by a Model 2 IGA should check “Reporting Model 2 FFI.”

If the FFI is treated as a registered deemed-compliant FFI under an applicable IGA, it should check “Nonreporting IGA FFI” rather than “registered deemed-compliant FFI” and provide its GIIN in Part XII, line 26.

An FFI that is related to a reporting IGA FFI and that is treated as a nonparticipating FFI in its country of residence should check the box for nonparticipating FFI in line 5. An FFI that is related to a reporting IGA FFI and that is a participating FFI, deemed-compliant FFI, or exempt beneficial owner under the U.S. Treasury regulations or an applicable IGA should check the appropriate box for its chapter 4 status.

Requirement to Provide a GIIN

If the entity is in the process of registering with the IRS as a participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, direct reporting NFFE, or sponsored direct reporting NFFE, but has not received a GIIN, it may complete this line by writing “applied for.” However, the person requesting this form must receive and verify the GIIN within 90 days.

For payments made prior to January 1, 2015, a Form W-8BEN-E provided by a reporting Model 1 FFI need not contain a GIIN. For payments made prior to January 1, 2016, a sponsored direct reporting NFFE or sponsored FFI that has not obtained a GIIN must provide the GIIN of its sponsoring entity in line 16.

501(c) Organization

Only foreign entities that are tax-exempt under section 501 should check the 501(c) organization “Tax-exempt organization” box. Such organizations should use Form W-8BEN-E only if they are claiming a reduced rate of withholding under an income tax treaty or a code exception other than section 501. If claiming an exemption from withholding under code section 501, then it must submit Form W-8EXP to document the exemption and chapter 4 status.

Non-Profit Organizations Covered by an IGA

A non-profit entity that is established and maintained in a jurisdiction that is treated as having in effect a Model 1 IGA or Model 2 IGA, and that meets the definition of Active NFFE under Annex I of the applicable IGA, should not check a box for its status on line 5.

Completion of Parts IV through XXVIII

An entity should complete only one part of Parts IV through XXVIII certifying to the chapter 4 status. But an entity that selects nonparticipating FFI, participating FFI, registered deemed-compliant FFI, reporting Model 1 FFI, reporting Model 2 FFI, or direct reporting NFFE (other than a sponsored direct reporting NFFE) is not required to complete any of the certifications in Parts IV through XXVIII.

Part IV Sponsored FFI
Part V Certified Deemed-Compliant Nonregistering Local Bank
Part VI Certified Deemed-Compliant FFI with Only Low-Value Accounts
Part VII Certified Deemed-Compliant Sponsored, Closely Held Investment Vehicle
Part VIII Certified Deemed-Compliant Limited Life Debt Investment Entity
Part IX Certified Deemed-Compliant Investment Advisors and Investment Managers
Part X Owner-Documented FFI
Part XI Restricted Distributor
Part XII Nonreporting IGA FFI
Part XIII Foreign Government, Government of a U.S. Possession, or Foreign Central Bank of Issue
Part XIV International Organization
Part XV Exempt Retirement Plans
Part XVI Entity Wholly Owned by Exempt Beneficial Owners
Part XVII Territory Financial Institution
Part XVIII Excepted Nonfinancial Group Entity
Part XIX Excepted Nonfinancial Start-Up Company
Part XX Excepted Nonfinancial Entity in Liquidation or Bankruptcy
Part XXI 501(c) Organization
Part XXII Non-Profit Organization
Part XXIII Publicly Traded NFFE or NFFE Affiliate of a Publicly Traded Corporation
Part XXIV Excepted Territory NFFE
Part XXV Active NFFE
Part XXVI Passive NFFE
Part XXVII Excepted Inter-Affiliate FFI
Part XXVIII Sponsored Direct Reporting NFFE
Part XXIX Substantial U.S. Owners of Passive NFFE
Part XXX Certification

Part X – Owner-Documented FFI

Line 24a. An owner-documented FFI must check the box to certify that it meets all of the requirements for this status and is providing this form to a U.S. financial institution, participating FFI, reporting Model 1 FFI, or reporting Model 2 FFI that agrees to act as a designated withholding agent with respect to the FFI identified on line 1. Then select either 24b or 24c.

Line 24b. Check this box to certify that the documentation set forth in the certifications has been provided (or will be provided), including the owner reporting statement described in this line 24b, or

Line 24c. Check this box to certify that the auditor’s letter has been provided (or will be provided).

Entities Providing Certifications Under an Applicable IGA

In lieu of the certifications contained in Parts IV through XXVIII of Form W-8BEN-E, a reporting Model 1 FFI or reporting Model 2 FFI in certain cases may request alternate certifications to document its account holders pursuant to an applicable IGA or it may otherwise provide an alternate certification to a withholding agent.

A withholding agent that is an FFI may provide a chapter 4 status certification other than as shown in Parts IX through XXVIII in order to satisfy its due diligence requirements under an applicable IGA. In such a case, attach that alternative certification to this Form W-8BEN-E in lieu of completing a certification otherwise required in Parts IV through XXVIII provided that:

1) the certification accurately reflects the chapter 4 status or under an applicable IGA; and

2) the withholding agent provides a written statement that it has provided the certification to meet its due diligence requirements as a participating FFI or registered deemed-compliant FFI under an applicable IGA.

An applicable IGA certification may be provided with the W-8BEN-E if determining chapter 4 status under the definitions provided in an applicable IGA and that certification identifies the jurisdiction that is treated as having an IGA in effect and describes the status as an NFFE or FFI in accordance with the applicable IGA.

However, if under an applicable IGA the entity’s status is determined to be an NFFE, it must still determine if it is an excepted NFFE under the FATCA Regulations. Additionally, the entity must comply with the conditions of its status under the law of the IGA jurisdiction.

For more indepth analysis than we can provide within this month’s article, along with 50 contributors, we analyzed the FATCA and the CRS compliance challenges.  Besides in-depth, practical analysis, we include examples, charts, time lines, links to source documents, and compliance protocols pursuant to IGAs and local regulations.  download my 118 page introductory analysis here

>>> Download 2016 Version of W-8BEN-E here <<<


June 21, 2016 in FATCA | Permalink | Comments (0)

Monday, June 20, 2016

Should I Stay or Should I Go? Brexit

The Clash summed up the European Union's attitude to the forthcoming Brexit vote (this Thursday June 23): 

This indecision's bugging me,

If you don't want me set me free.

The BBC explain the vote here.  Issue by Issue - both sides of the arguments here.

The Telegraph explains the perspective of banks preparing for a UK market collapse here if it votes to leave the EU.  "The Euro Stoxx index of bank equities fell to a four-year low, and is nearing levels last seen in during the eurozone debt crisis in 2012. Europe’s banks have lost half their value in the last year. "

June 20, 2016 in Economics | Permalink | Comments (0)

Don’t Forget to Report Certain Foreign Accounts to Treasury by the June 30 Deadline

The Internal Revenue Service today reminded taxpayers who have one or more bank or financial accounts located outside the United States, or signature authority over such accounts Irs_logo that they may need to file an FBAR by Thursday, June 30.

By law, many U.S. taxpayers with foreign accounts exceeding certain thresholds must file Form 114, Report of Foreign Bank and Financial Accounts, known as the "FBAR." It is filed electronically with the Treasury Department's Financial Crimes Enforcement Network (FinCen).

"Robust growth in FBAR filings in recent years shows we are getting the word out regarding the importance of offshore tax compliance," said IRS Commissioner John Koskinen. "Taxpayers here and abroad should take their foreign account reporting obligations very seriously.”

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.

In 2015, FinCen received a record high 1,163,229 FBARs, up more than 8 percent from the prior year. FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCen data.

The IRS is implementing the Foreign Account Tax Compliance Act (FATCA), which mandates third-party reporting of foreign accounts to foster offshore tax compliance. FATCA created a new filing requirement: IRS Form 8938, Statement of Specified Foreign Financial Assets, which is filed with individual tax returns. The filing thresholds are much higher for this form than for the FBAR.

Professor William Byrnes of Texas A&M University's law school commented "In 2002, the IRS reported to Congress that the FBAR compliance rate was less than 20 percent because it had received fewer than 200,000 FBARs when one million taxpayers may have been required to file.  Then in 2013 the Taxpayer Advocate reported, relying on State Department statistics, that 7.6 million U.S. citizens reside abroad and many more U.S. residents have FBAR filing requirements for foreign accounts.  The Taxpayer Advocate noted that in Mexico alone, more than one million U.S. citizens reside, and many Mexican citizens reside in the U.S."

"Only 1.1 million FBARs from a potential class of between seven and ten million taxpayers with foreign asset exposure appears to me to be approximately a ten to fifteen percent compliance rate."  It may be that the IRS is putting a brave face on a bad situation that Congress needs to clean up through policy change or funding change?"

"Not every FBAR filer will also need to file a Form 8938, Statement of Specified Foreign Financial Assets, but many will.  Yet, Form 8938 filings only reached 300,000 for tax year 2014 (roughly the same as 2013), up from 200,000 for tax year 2011 - the first year of the form," continued Byrnes.

 For a detailed FBAR and Form 8938 enalysis, download my 118 page article.

June 20, 2016 in FATCA, FinCEN, Tax Compliance | Permalink | Comments (0)

Sunday, June 19, 2016

CRA Credit Education Services: An Examination of Consumer Impacts

For those who completed the personalized credit education session with a credit advisor from a nationwide consumer reporting agency (CRA), most seemed to benefit. More than 85% of those who completed the personalized credit education session with a credit advisor and completed a follow-up survey reported that the experience was useful—with many reporting profound and positive impacts on their overall credit literacy.

In an earlier PERC / University of Arizona joint study and in this interim PERC report, individuals who completed the personalized credit education session saw material benefits CFPB_Logo
(credit score improvement resulting in movement into a better credit risk tier) at higher rates than those who only read generic literature on credit reports and credit scores—22% vs. 13% in the earlier analysis. In both the studies, the majority of those who took the credit education session witnessed credit score increases in the months following the credit education session. In the new analysis presented in this interim report, 68% of such consumers witnessed a credit score increase with 38% witnessing a credit score increase greater than 20 points.

Key Findings

For a variety of reasons, many consumers remain confused about the basic facts relating to credit reports, credit scores, and how their behavior impacts each. Given the importance of credit reports and credit scores to an individual’s ability to access affordable credit, this lack of credit report and score literacy should be of concern for policy makers and consumer advocates. 

Perversely, the Credit Repair Organizations Act (CROA) acts to inhibit the use of fee based credit report and score education services with waiting periods and intimidating legal
disclaimers.  It was aimed at fraudulent credit repair organizations and written prior to the development of direct-to-consumer credit report and score information and education services by the likes of the national credit bureaus, FICO, and certainly on-line service such as Credit Karma.

This interim report presents findings from a larger ongoing study examining the impacts of the CROA upon consumer behavior when using services provided by the national credit bureaus that offer advice on how to improve their credit scores. Additionally, our research design seeks to measure the impacts of personalized credit education from a national credit bureau on a consumer’s credit standing. That is, after completing a personalized credit education session does the consumer experience any benefit? Finally, the ongoing research includes a survey of those who completed the personalized credit education session and those who dropped off in an effort to understand better the consumers’ views on whether the experience was beneficial or why they did not complete a session. Key findings from the interim report include:

• Personalized credit education materially benefits consumers: For the Credit Educator group, nearly three times as many consumers, 23%, improved and moved up score bands
(such as from subprime to near prime or prime) compared to the number that moved down a score band, 8%, three months following the credit education session. For the
control group, there is no systematic change in the distribution, with the same share moving up as moved down, 7%.

• Nearly 7 in 10 experience score increase after personalized credit education session: 

In the interim results, 68% see a credit score rise using the VantageScore 3.0 three months after the credit education. A full 30% of those receiving personalized credit
education from a credit bureau advisor experienced a score increase between 1 and 20 points, while an astounding 38% experienced a score increase of 21 points or more 90
days after completing the session.

• Nearly all participants report improved understanding of credit reports and credit scores after completing personalized credit education session: 93% of those
completing a personalized credit education session with a credit bureau credit advisor reported that they have a better understanding of the actions they can take to improve
their credit score.

• Most consumers likely to act on knowledge: More than half of those who completed a personalized credit education session with a credit bureau credit advisor reported that the
would request their free annual credit reports from each of the three national credit bureaus (63%), are more likely to review their credit reports (59%), and are more likely
to dispute any perceived errors in their credit reports (58%).

Download Prelim_CE_Report

June 19, 2016 in Financial Regulation | Permalink | Comments (0)

Saturday, June 18, 2016

CFATF Public Statement on Haiti and Suriname

Montego Bay, Jamaica, June 8th, 2016 - The Caribbean Financial Action Task Force (CFATF) is an organisation of twenty-seven jurisdictions of the Caribbean Basin Region, which FATF logohave agreed to implement the international standards for Anti-money Laundering and Combating the Financing of Terrorism (AML/CFT), Financial Action Task Force Recommendations (FATF Recommendations). In order to protect the international financial system from money laundering and financing of terrorism (ML/FT) risks and to encourage greater compliance with the AML/CFT standards, the CFATF identified jurisdictions that have strategic deficiencies and works with them to address those deficiencies that pose a risk to the international financial system.

Jurisdiction with strategic AML/CFT deficiencies that has not made sufficient progress in addressing the deficiencies or has not complied with the Action Plan developed with the CFATF to address these deficiencies.

The CFATF calls on its members to consider the risks arising from the deficiencies associated with each jurisdiction, as described below.


Pursuant to the mandate of the CFATF, the CFATF undertook a High Level Mission (HLM) to the Republic of Haiti on Monday 27th of April 2015. Thereinafter, a letter from the CFATF Chair, was sent to Haiti on the 17th of September 2015, making reference to the decision by the CFATF’s XLI Plenary Meeting, which was held in Port of Spain, Trinidad and Tobago, May 27th and 28th, 2015, that Haiti would remain in the second stage of enhanced of follow-up, with no additional sanction measures being taken, but would need to demonstrate progress in nonlegislative measures (such as developing a freezing mechanism for terrorist assets) by November 2015. At the CFATF Plenary in November 2015, Haiti demonstrated some progress on non-legislative measures. Plenary determined that Haiti should remain in the status quo and demonstrate to the May 2016 Plenary substantial compliance with both non-legislative and legislative requirements. Haiti has taken steps towards improving its AML/CFT compliance regime with non-legislative actions, including providing training to FIU, Police officers, Prosecutors and Magistrates; and taking steps to join the Egmont Group. With regard to legislative actions, some progress was indicated, including an update of the Central Bank Guidelines to strengthen CDD measures, which is in force; and drafting additional amendments to the Bill on UCREF to allow the exchange of information with counterpart agencies under condition of reciprocity.

However, the CFATF has determined that Haiti has failed to make sufficient progress in addressing its significant strategic AML/CFT deficiencies, including certain legislative reforms.

If Haiti does not take specific steps by November 2016, then the CFATF will further consider whether to identify Haiti as not taking sufficient steps to address its AML/CFT deficiencies and whether to take the additional steps of calling upon its Members to consider implementing counter measures to protect their financial systems from the ongoing money laundering and terrorist financing risks emanating from Haiti.

Jurisdiction with strategic AML/CFT deficiencies that has made significant progress in addressing these deficiencies.


The CFATF acknowledges the significant progress made by Suriname in improving its AML/CFT regime and notes that Suriname has established the legal and regulatory framework to meet its commitments in its agreed Action Plan regarding the strategic deficiencies that the CFATF had identified. Suriname and the CFATF should continue to work together to ensure that Suriname’s reform process is completed, by addressing its remaining deficiencies and continue implementing its Action Plan.

Information on Haiti on the FATF website.

Information on Suriname on the FATF website.

June 18, 2016 in AML | Permalink | Comments (0)

Friday, June 17, 2016

Position Announcement: Law Library Faculty – Electronic Services Librarian

The Dee J. Kelly Law Library at Texas A&M University School of Law seeks to expand our team of law library faculty by hiring an Electronic Services Librarian.  The law library faculty TAMU-Law-lockup-stack-SQUARE (1)is comprised of both long-term contract and tenure-track faculty. The law library’s mission is to be an active and responsive force in support of the law school as it fulfills its mission of providing excellence in legal education, emphasizing foremost meeting the educational, teaching, scholarship, research, and service needs of the faculty, students, and staff of the law school.   

We seek to recruit an experienced, dynamic, and innovative law librarian who can successfully advance library initiatives as an Electronic Services Librarian.  The Electronic Services Librarian leads not only the marketing of the faculty’s scholarship but also advertises the library’s electronic databases and instructs in using these databases.  This position is the point person for overseeing the law school’s institutional repository of scholarship and its components and also participates in reference services to the law school community.

Required Qualifications:

  • American Bar Association (ABA)-accredited JD
  • American Library Association (ALA)-accredited Master’s degree (or international equivalent)
  • Experience using and instructing on electronic legal resources including Westlaw, Lexis, and Bloomberg Law
  • Experience with bepress’s Digital Commons including SelectedWorks
  • Attention to detail and service orientation a must
  • Strong computer skills and the ability to easily learn new electronic programs and technical skills
  • Excellent written and oral communication skills
  • Ability to work independently and as part of a team
  • Strong sense of collegiality and commitment to legal education and librarianship

Preferred Qualifications: 

  • Experience in providing general legal reference services for law faculty, students, or members of the bench and bar
  • Experience with current and emerging technologies that impact libraries, education, and law practice
  • Knowledge of library operations 


The University:

Founded in 1876 as a land-grant institution, Texas A&M University is the sixth largest university in the nation. The signature Aggie Spirit captures and embodies the university’s traditions and core values: Excellence, Integrity, Leadership, Loyalty, Respect, and Selfless Service. The university has an enrollment of more than 55,000 students and 2,800 instructional faculty. Based on Vision 2020, the institution’s goal is to become a premier, tier-one research university and to be ranked among the top 10 public universities nationwide by 2020.

The Law School:

As part of its commitment to continue building on its tradition of excellence in scholarship, teaching, and public service, Texas A&M acquired the law school from Texas Wesleyan University in August of 2013.  Since that time, the law school has embarked on a program of investment that increased its entering class credentials and financial aid budgets, while shrinking the class size; hired twelve new faculty members, including nine prominent lateral hires; improved its physical facility; and substantially increased its career services, admissions, and student services staff.

The Law Library:

The law library is located on the lower level of the law school building and holds over a quarter of a million volumes and volume equivalents which are accessible through the online catalog. During its regular schedule, the law library is open over 110 hours per week, with a professional librarian available for over 50 of those hours. The law library faculty is comprised of seven professional librarians, all of whom have a master’s degree in Library Science and five of whom also hold juris doctorates.

The Community:

Texas A&M School of Law is located in the heart of downtown Fort Worth, one of the largest and fastest growing cities in the country.  The Fort Worth/Dallas area, with a total population in excess of six million people, offers a low cost of living, a strong economy, and access to world-class museums, restaurants, entertainment, and outdoor activities.


Faculty rank and salary are commensurate with qualifications and experience; the position may be hired as either long-term contract or tenure-track and the annual salary range is $65,000-$72,000. Excellent benefits include a health plan and paid life insurance; several retirement plans including TIAA-CREF; paid holidays and vacation; no state or local income tax. Funding is available for professional travel and development activities.


Applications received by July 6, 2016 will be given first consideration. The letter of application should address the responsibilities, qualifications, and experiences listed for the position. Please submit an application letter, vita, and the names, email addresses and telephone numbers of three professional references.  References will not be contacted without contacting the candidate first and verifying permission.  Send nominations and applications via email to Professor Joan Stringfellow, Chair of the Law Library Search Committee at or mail to Professor Joan Stringfellow at Texas A&M University School of Law, 1515 Commerce Street, Fort Worth, Texas 76102-6509.

As an Equal Opportunity Employer, Texas A&M is committed to employing quality faculty who will enhance the rich diversity of our academic community. In that regard, we are particularly interested in receiving applications from a broad spectrum of qualified individuals who will enhance the rich diversity of the university’s academic community and who are representative of the state’s diversity.

For more information about the law library, see, about the law school,, about the university,, and about the community,

June 17, 2016 in Education | Permalink | Comments (0)

Thursday, June 16, 2016

Former Chief Administrative Law Judge Pleads Guilty to Conspiracy to Retaliate Against Informant in Fraud Scheme for $600 million in Disability Payments

A former social security Chief Administrative Law Judge pleaded guilty in federal court today for conspiring to retaliate against a former employee of the Social Security Oig-logoAdministration (SSA) who provided information regarding potential corruption and fraud to federal investigators.

Charlie Paul Andrus, 66, of Huntington, West Virginia, pleaded guilty before U.S. District Judge Danny C. Reeves of the Eastern District of Kentucky to a one-count information charging him with conspiracy to retaliate against an informant. Andrus had been an administrative law judge with the SSA for nearly 28 years, where he was responsible for adjudicating claims for disability benefits on behalf of the SSA. In 1997, Andrus was promoted to the position of Chief Administrative Law Judge for the hearing office located in Huntington.

According to court documents, on May 19, 2011, federal agents went to the Huntington hearing office and began securing evidence and interviewing witnesses as part of an investigation into allegations of potential corruption and fraud at the hearing office purportedly committed by Administrative Law Judge David Black Daugherty and an attorney in Kentucky, Eric Christopher Conn. That same day, The Wall Street Journal published an article critical of the Huntington hearing office. Andrus admitted that the article was personally embarrassing, as it cast both him and the Huntington hearing office in a negative light. Because of the article and the criminal investigation, Andrus was demoted from his position as Chief Administrative Law Judge.

Andrus admitted that at the time of his demotion, he was aware that an SSA employee from the hearing office was meeting with investigators and relaying information about potential federal offenses. According to his plea agreement, Andrus met with Conn shortly after the article was published and the two devised and implemented a plan to discredit the informant. According to court documents, the plan involved filming the informant violating a program that allowed employees to work from home, with the hope that the informant would be terminated as a result. By pleading guilty today, Andrus admitted that he was aware that the SSA employee reported truthful information to federal investigators and that he wanted to retaliate against the employee by interfering with the employee’s employment and livelihood.

In a related case, Conn and Daugherty were charged in an 18-count indictment with conspiracy, fraud, obstruction, false statement and money laundering in connection with a scheme to fraudulently obtain more than $600 million in federal disability payments for thousands of claimants. That indictment included charges related to the conduct that forms the basis of Andrus’ guilty plea. An indictment is merely an allegation and all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The SSA-OIG, FBI, IRS-CI and HHS-OIG investigated the case. Trial Attorney Dustin M. Davis and Special Trial Attorney Trey Alford of the Criminal Division’s Fraud Section and Trial Attorney Kristen M. Warden of the Criminal Division’s Asset Forfeiture and Money Laundering Section are prosecuting the case.

June 16, 2016 in AML | Permalink | Comments (0)

Wednesday, June 15, 2016

OECD Council approves incorporation of BEPS amendments into the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations

The OECD Council approved the amendments to the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations ("Transfer Pricing Guidelines"), as set out in OECD Transfer Pricingthe 2015 BEPS Report on Actions 8-10 "Aligning Transfer Pricing Outcomes with Value Creation" and the 2015 BEPS Report on Action 13 "Transfer Pricing Documentation and Country-by-Country Reporting". These amendments provide further clarity and legal certainty about the status of the BEPS changes to the Transfer Pricing Guidelines.

The amendments approved by the Council translate these BEPS transfer pricing measures into the Transfer Pricing Guidelines, as well as into the Recommendation of the Council on the Determination of Transfer Pricing Between Associated Enterprises [C(95)126/FINAL], which now contains a reference in the Preamble to these BEPS Reports. Given the way in which the Transfer Pricing Guidelines are integrated into the domestic law of certain countries, including by direct reference to the Guidelines themselves, this update process further clarifies the status of the BEPS changes to the Transfer Pricing Guidelines.

The specific changes introduced in the Transfer Pricing Guidelines by these Reports are as follows:

  • The current provisions of Chapter I, Section D of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.
  • Paragraphs are added to Chapter II of the Transfer Pricing Guidelines, immediately following paragraph 2.16.
  • A new paragraph is inserted following paragraph 2.9.
  • The current provisions of Chapter V of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance and annexes.
  • The current provisions of Chapter VI of the Transfer Pricing Guidelines and the annex to this Chapter are deleted in their entirety and replaced by new guidance and annex.
  • The current provisions of Chapter VII of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.
  • The current provisions of Chapter VIII of the Transfer Pricing Guidelines are deleted in their entirety and replaced by new guidance.

Further work is being undertaken to make conforming amendments to the remainder of the Transfer Pricing Guidelines, in particular to Chapter IX "Transfer Pricing Aspects of Business Restructurings." This work is well advanced and it is expected that Working Party No. 6 of the Committee on Fiscal Affairs will soon invite interested parties to review the conforming changes to Chapter IX to establish that real or perceived inconsistencies with the revised parts of the Guidelines have been appropriately addressed, and duplication appropriately removed.

The conforming changes are expected to be approved later in 2016. Until then, it is stipulated that the provisions of the Transfer Pricing Guidelines should be interpreted to be consistent with those provisions of the Transfer Pricing Guidelines which have been amended by the 2015 BEPS Report on Actions 8-10 and 2015 BEPS Report on Action 13 and, in case of perceived inconsistencies, the modified provisions prevail.

Practical Guide to U.S. Transfer Pricing is updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel.

June 15, 2016 in BEPS | Permalink | Comments (0)

Florida Woman Pleads Guilty to Spy Activities and Conspiring to Commit Money Laundering

Amin Yu, 54, of Orlando, Florida, pleaded guilty today to acting in the United States as an illegal agent of a foreign government without prior notification to the Attorney General and FBISeal (1)conspiring to commit international money laundering.

The plea agreement was announced by Assistant Attorney General for National Security John P. Carlin and U.S. Attorney A. Lee Bentley III of the Middle District of Florida.

“Amin Yu admitted to secretly serving as an agent of the Chinese government,” said Assistant Attorney General Carlin.  “Yu obtained and illegally exported items and technology related to marine submersible vehicles at the direction and control of a state-owned entity in China.  Protecting our national assets by disrupting efforts by foreign governments to steal sensitive equipment and technology will continue to be a high priority of the National Security Division.”

“Amin Yu made hundreds of thousands of dollars by acting covertly in Orlando on behalf of the Chinese government and by skirting U.S. export laws and regulations,” said U.S. Attorney Bentley.  “The enforcement of U.S. laws and regulations related to the national security of the United States remains a top priority for our office.”

According to the plea agreement, from at least 2002 until February 2014, at the direction of co-conspirators working for Harbin Engineering University (HEU), a state-owned entity in the People’s Republic of China, Yu obtained systems and components for marine submersible vehicles from companies in the United States.  She then illegally exported those items to the PRC for use by her co-conspirators in the development of marine submersible vehicles – unmanned underwater vehicles, remotely operated vehicles and autonomous underwater vehicles – for HEU and other state-controlled entities.  Yu illegally exported items by failing to file electronic export information (EEI), as required by U.S. law, and by filing false EEI.  In particular, Yu completed and caused the completion of export-related documents in which she significantly undervalued the items that she had exported and provided false end user information for those items.

Yu faces a maximum penalty of 10 years in prison for acting as an illegal agent of a foreign government and up to 20 years in prison for conspiring to commit money laundering.  A sentencing hearing is scheduled for Aug. 29, 2016.  

This case was investigated by the FBI, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the Internal Revenue Service-Criminal Investigation and the Naval Criminal Investigative Service.  The case is being prosecuted by Assistant U.S. Attorney Daniel C. Irick of the Middle District of Florida and Trial Attorneys David C. Recker and Thea D. R. Kendler of the National Security Division’s Counterintelligence and Export Control Section.

June 15, 2016 in AML | Permalink | Comments (0)