Page 2 - U.S. Taxpayer Revelations From Panama Leak Expected to Be Modest

easy to do," he said. Those setting up shell companies offshore typically seek out jurisdictions where lawyers speak English and where the path through legal issues that come up for U.S. account holders has been well-trod, he noted. Places like Singapore, Hong Kong, or the British Virgin Islands are a little more comforting to U.S. citizens, said Song, adding, "If there was a leak from Singapore or Hong Kong, I would be surprised if more American names didn't show up."
Matthews pointed out that in order for a U.S. citizen to own property in some Caribbean and Central American countries, they need to have a local entity formed. "There could be 200 American citizens with a second home in Belize or Panama who created a corresponding structure -- those would all be legal," he said. "While some may not have realized their U.S. tax reporting obligations, it's not going to be a big U.S. tax evasion scheme."
Mossack Fonseca's website doesn't list the U.S. among jurisdictions it offers research, advice, and services for. It does list the United Kingdom, British Virgin Islands, the Bahamas, Hong
.) "As a policy, we prefer not to have American clients," Mossack Fonseca co-founder Ramón Fonseca
reportedly told the Associated Press during an April 7 interview. A 2014 email by Michael B. Edge, who has acted as an intermediary for hundreds of companies Mossack Fonseca has registered, said that the firm wanted to "avoid further attempts by American authorities to attack the Partnership," according to a May 9 story in The Washington Post.
Mossack Fonseca declined to comment on the topic for the story.
Matthews said it's plausible that the IRS, DOJ, and U.S. compliance requirements make the U.S. market a more dangerous and burdensome environment to do business in. Song agreed that Mossack Fonseca may not have wanted to risk catching the attention of the IRS. The "IRS Criminal Investigation unit has the best financial investigators in the world," he said.
But one international tax expert who asked not to be identified said that while the proliferation of offshore disclosure and transparency initiatives and enforcement efforts by the IRS and DOJ might explain a dearth of American clients in the last several years, it doesn't explain a scarcity of American participants before the most recent wave of enforcement. Data leaked to the ICIJ go as far back as 1977.
On the other hand, it's not uncommon for Panamanian law firms to have few, if any, American clients, the expert said. Much of their business comes from Central and South America. "U.S. people doing asset protection work, for whom privacy is a driving concern, may see a better- trodden path and a better-developed network of advisers in the Caribbean," he said, adding that there are cultural and legal distinctions between Central American and Caribbean countries that may help to explain differences in the markets.
What can get overlooked in safer parts of the world is that there are different motivations in some countries that may not square with many Americans' ideas of a shell company's usefulness. "In Colombia, for example, historically there was rampant kidnapping," the expert said, adding that some South American clients even have kidnapping insurance policies.
"In these regions, if it's known that you have means, then you're a target," he said. Whether a structure designed to provide privacy is tax compliant may be just one of a number of concerns
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