Business Crimes Hotline

The significance of the matter was highlighted by the U.S Attorney for the Southern District of New York, Preet Bharara, who stated in announcing the pleas that they “represent the first convictions of financial institutions outside Switzerland for conspiring with U.S. taxpayers to evade their lawful and legitimate taxes.” The prosecution further demonstrates the Government's continued efforts to dismantle foreign tax havens for U.S. citizens.

For approximately 10 years, between 2001 to 2011, CNS and CNT knowingly operated and maintained undeclared accounts for American taxpayers. Specifically, CNS and CNT encouraged their clients to open accounts held in the name of Caymanian shell companies. These shell companies were nominally controlled by bank officials and allegedly provided brokerage and investment services. In reality, the companies provided no services. Their use was only to hold client funds without requiring documentation (including W-9 forms) that would identify the individuals as American taxpayers. CNS and CNT continued their activities even after the highly publicized 2008 disclosure of the Department of Justice's (DOJ) investigation of Swiss global financial services company, UBS AG, for a similar scheme.

A review of client files was commenced when CNT hired a new president in 2011. CNT's management concluded that all files lacked the requisite degree of documentation and posed tax and/or regulatory issues. Additionally, most files lacked any evidence of basic U.S. tax compliance.

As part of their pleas, CNS and CNT must make substantial efforts to cooperate with the ongoing investigation and in particular, they are required to produce account files for all U.S. taxpayer-clients. To date, they have already produced 90%-95% of their U.S. client files in unredacted form. This information is particularly relevant as the government evaluates potential enforcement actions against the individual taxpayers involved in the scheme. Additionally, CNS and CNT have already facilitated interviews of top company executives and produced a number of other documents.

A representative of the parent company stated that there are policies and procedures implemented, in addition to dedicated staff on duty, to detect and prevent any future misconduct of this nature.

The Financial Services Ministry of the Cayman Islands noted its disappointment in CNS and CNT in commenting about the matter, stating that “this settlement may give the public more reason to believe popular misconceptions about the Cayman Islands but in truth it does not speak to the hard work that we have invested, through more than 15 years of continuous global tax cooperation efforts, to minimize and combat illicit activity.”

'