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US Says It Will Investigate Tax Evasion It Previously Ignored

  • Mossack Fonseca is at the heart of the Panama Papers scandal, the biggest leak in history.

    Mossack Fonseca is at the heart of the Panama Papers scandal, the biggest leak in history. | Photo: AFP

Published 5 April 2016

The United States is the world's third-largest tax haven, with Nevada and Delaware at least as popular as Panama.

The U.S. Justice Department will investigate claims of widespread tax evasion following the Panama Papers revelations, but tax justice groups doubt that probes could make a dent into one of the world’s biggest tax havens.

The Justice Department “ takes very seriously all credible allegations of high level, foreign corruption that might have a link to the United States or the U.S. financial system,” said spokesperson Peter Carr.


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A Treasury Department spokesperson likewise said it would use “all sources of information ... to detect and respond to potential sanctions violations.”

Observers suggested the moves were prompted by the recent leaked revelations.

"The most worrying aspect of this scandal is the huge shortfall in U.S. efforts to tackle global money laundering," Ben Rose, partner and co-founder at criminal law firm Hickman & Rose, told CNBC.

While the Justice Department has opened numerous cases prosecuting tax evasion, the United States remains the third-biggest tax haven in the world, according to the Tax Justice Network, and the fourth-biggest home to intermediaries involved in the Panama Papers scandal, which exposed the offshore interests of world leaders facilitated by law firm Mossack Fonseca.

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It also refused to agree to OECD standards on information exchange, keeping a model that "risks tearing a giant hole in international efforts to crack down on tax evasion, money laundering and financial crime," according to a report by the Tax Justice Network.

"Financial secrecy provided by the U.S. has caused untold harm to the ordinary citizens of foreign countries, whose elites have used the United States as a bolt-hole for looted wealth," said the report.

The leak, the largest in history, has implicated major U.S. allies, such as Ukrainian President Petro Poroshenko. Many of those named may have also used U.S. accounts and committed financial crime in the U.S. with U.S. companies. Many foreign politicians have lavish houses in Miami and hundreds benefit from lax state tax policy in Nevada, Wyoming and Delaware.


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"In Delaware, for instance, you need to provide more information to obtain a library card than to start a company," according to the Financial Transparency Coalition.

Congress introduced a bill to increase transparency for U.S.-based companies in February, but it remains on the table and has received multiple lobbying visits from banks and the state of Delaware, according to Open Secrets.

The federal government has officially approved facilities to aid with tax evasion, but state policy represents "the fruit of a race to the bottom between individual states on standards of disclosure and transparency," wrote the Tax Justice Network report.

While the U.S. said it would crack down on corruption abroad as long as it is connected to the U.S., the widespread corruption revealed by the leaks centered around a close partner that has enjoyed multiple privileges through a 2012 free trade agreement.

"Panama is not quite the 51st state, but it is closely tied to the U.S., within its sphere of influence and umbilically linked by the two countries' mutual benefit from the canal,” said Rose. “It is extraordinary that it continues to operate in this way."

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