The US is famous for going after overseas tax evaders. Once caught, tax-dodgers often end up paying steep fines, as do their enablers for hiding them. Swiss banks, for example, have paid upwards of 5.5 billion dollars in fines, mostly as a result of the 2008 UBS raid that forced UBS to reveal the names of over 4,500 American account holders.
In 2010, the US passed a law called FATCA, which requires that foreign financial firms hand over information on American clients to the IRS. In response, more than 100 countries joined the Common Reporting Standard (CRS), an agreement to exchange tax-relevant information. The catch, however, is that the US did not join the CRS. Instead, the US has continued chasing tax evaders through its own legislation.
Even though FATCA includes a provision on reciprocity, many countries receive no information from the US. Ironically, this has led the US to become a preferred choice of location for tax evaders. It has even been estimated that as much as "90% of assets avoiding the CRS have been herded into the USA."
In April of this year, however, the US got a taste of its own medicine. Finland issued a "John Doe" summons (the same summons used by the US against Swiss bank UBS) to three banks in the US for account information on Finnish citizens. Frequent, high‑volume withdrawals from American accounts through ATMs in Finland led the Finnish tax authorities to suspect that the people making the withdrawals had not declared taxable funds stashed in American banks.
The Finland case could mark a turning point in terms of financial transparency, emboldening other countries to flex their fiscal muscles when it comes to requesting information on international accounts held in the US. In fact, 90 countries have bilateral tax treaties with the US, giving them the right to request information not only on bank accounts but also on trusts and insurance policies, which are popular methods for hiding funds to avoid taxes.
Perhaps Mark Morris, an international tax consultant, put it best when he commented that tax evaders hiding capital in the US should "prepare to be smacked open like a piñata."
