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What lessons can be learned from the Panama Papers?

 The Panama Papers: Lessons from the largest document leak in history.

On April 3, 2016, dozens of major news agencies around the world began to publish materials related to the so-called “Panama Papers” – a collection of documents on offshore schemes from a little-known company, Mossack Fonseca. According to Panamanian law and the policy of many other similar “tax havens”, opening a company and enjoying tax benefits is not permissible without the existence of a local agent.

Who is implicated in the Panama Papers?

The Panama Papers signify an unprecedented leak of an offshore data. More than 100 politicians and public figures have been implicated, from the famous footballer Lionel Messi and the son of the former UN Secretary General Kofi Annan to friends of Russian President Vladimir Putin and the Ukrainian leader Petro Poroshenko. Among Mossack Fonseca clients, there are individuals associated with Mexican drug lords, the family of Muammar Gaddafi and Bashar al-Assad.

Not all persons mentioned in the “Panama archive” are suspected of having committed any crimes. For example, Mossack Fonseca runs six companies belonging to movie star Jackie Chan, but there is no indication that he was using them for illegal activities. Published materials may be a cause for criminal cases against officials and businessmen around the world, but violation of the law has yet to be proved in the investigative and judicial procedure.

What lessons should be learned from the Panama scandal?

Since the routine use of offshore companies is not a crime, you need to clearly understand the precise point at which a financial offense begins. The International Court of Justice states that they found “no evidence of wrongdoing by Mossack Fonseca & Co or that any of the entities disclosed in the data breach were used for an improper purpose”. Consequently, the company can not be implicated in criminal activities, but its customers still may be.

For those who are concerned about the Panama Papers and who have undeclared cash accounts or use the services of offshore companies, we have prepared some simple tips to keep you and your business affairs on the straight and narrow.

What steps should I take regarding my own offshore accounts?

To avoid being implicated in similar financial crimes, it is important to take the following steps.

1. You should carefully follow the recommendations of professional advisors who know the limit beyond which an offense begins. U.S.citizens or legal residents should contact competent tax counsel since the state requires the report of financial interest in or signature authority over a foreign financial account that exceeds $10,000 at any time during the calendar year. You can use our fillable Form TD F 90-22.1 for this case.

2. In 2012, the IRS developed Offshore Voluntary Disclosure Program. Participants of this program are exempt from any prosecution in exchange for full disclosure of all hidden financial accounts and payment of fines and taxes on those accounts. To apply for an OVD Program you should use PDFfiller’s fillable forms: Form 114Form 433A, Form 433B, Form 872, Power of Attorney Form for the Offshore Voluntary Disclosure Initiative.

3. In addition to the OVDP, the IRS maintains othecalr Streamlined Foreign Offshore Procedures created for negligent taxpayers. These taxpayers are required to certify that their failure to report all income and pay tax was involuntary and according to some objective reason, which must be specified separately.

You can find these and any other documents you may need for offshore account reporting on PDFfiller’s website. Be sure to check out this recent post on Reporting Foreign Financial Assets as well. While we can’t stand in for your conscious, we can make it a little easier to stay on the correct side of the law!