NEW YORK – Two Cayman Islands financial institutions have pleaded guilty to conspiring to hide more than US$130 million in Cayman bank accounts, marking the first conviction of a non-Swiss financial institution for tax evasion conspiracy.

 

Cayman National Securities Ltd. (CNS) and Cayman National Trust Co. Ltd. (CNT), two affiliates of Cayman National Corporation, which provided investment brokerage and trust management services to individuals and entities within and outside the Cayman Islands, including citizens and residents of the United States, entered the pleas in a Manhattan court on Wednesday.

 

Under plea agreements, CNS and CNT admitted to conspiring with many of their American taxpayer-clients to hide the money in offshore accounts from the US Internal Revenue Service (IRS) and to evade US taxes on the income earned in those accounts.

 

The companies will be required to, among other things, produce account files of non-compliant American taxpayers who held accounts with them, and pay a total of US$6 million in financial penalties.

 

“ . . . Because we are committed to finding and prosecuting not only banks that help US taxpayers evade taxes, but also individual taxpayers who find criminal ways not to pay their fair share. We will follow them no matter how far they go to hide their accounts, whether it is Switzerland, the Cayman Islands, or some other tax haven,” Manhattan US Attorney Preet Bharara said.

 

Acting Deputy Assistant Attorney General Stuart Goldberg said the convictions showed that the focus was not on any one bank, insurance company, asset management firm, or country.

 

And he reiterated Bharara’s warning that there are no safe havens for US citizens engaged in tax evasion or those actively assisting them.

 

According to the statements made during the plea proceedings on Wednesday, and other documents filed in Manhattan federal court, from at least 2001 through 2011, CNS and CNT, which are both located in Grand Cayman, assisted certain American taxpayers in evading their tax obligations to the IRS, and otherwise hiding accounts, by knowingly opening and maintaining undeclared accounts for them.

 

CNS and CNT opened, and/or encouraged many taxpayer-clients to open accounts held in the name of sham Caymanian companies and trusts; treated those sham structures as the account holders and allowed the US beneficial owners of the accounts to trade in US securities; and failed to disclose to the IRS the identities of those who were trading in US securities.

 

According to the Department of Justice, even after learning about the investigation of Swiss bank UBS AG around 2008, for assisting American taxpayers in evading their obligations, CNS and CNT still continued their illegal practices and did not begin to engage in any significant remedial efforts with respect to those accounts until 2011 and 2012.

 

Caribbean 360