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Associated Press

October 31, 2000, Tuesday

IRS can seek Amex, MasterCard
records in offshore probe

By Catherine Wilson
AP Business Writer

     Miami, FL -- In a sweeping tax-evasion probe, the IRS has been granted access to thousands of MasterCard and American Express credit card accounts held by U.S. taxpayers in three offshore banking havens. 

     U.S. District Judge Adalberto Jordan on Monday agreed with the IRS that cardholders may have violated U.S. tax laws and that their identities are not readily available from other sources. 

     The court order allows the IRS to issue summonses for charge, debit and credit cards issued by banks in the Bahamas, the Cayman Islands and the country of Antigua and Barbuda in 1998 and 1999. 

     Investigators want to look at such things as car, boat and airline ticket purchases and hotel and car rentals to learn whether the account holders are living beyond their reported means. 

     The investigation is one of the largest targeting offshore accounts in the history of the Internal Revenue Service. 

     MasterCard International spokeswoman Sharon Gamsin said in a statement that the company has "a long history of cooperating with governmental agencies." But she also said MasterCard keeps transaction records only by account number, with the bank keeping personal information.

     Judy Tenzer, a spokeswoman for American Express Travel Related Services Co., said, "We are now speaking to the IRS to get a better idea of what they're looking at." 

     Neither spokeswoman would answer questions.

     Offshore accounts are legal for U.S. taxpayers, but they must file forms with the IRS about them and pay taxes on income earned in the United States.

     The three nations targeted by the IRS have long been known as offshore tax havens and favorite spots for drug money launderers.

     Promoters of offshore accounts boast that income can be sheltered because the U.S. government cannot penetrate some foreign banking secrecy laws. 

     But the IRS believed it could avoid those laws by getting records through the Miami headquarters of the companies' Caribbean operations.

     The IRS does not know how many accounts created by U.S. citizens and residents are involved but believes the number to be in the thousands.

     Banks in the targeted islands require customers to open bank accounts before obtaining credit cards. So obtaining the names of the cardholders produces the names of the bank account holders as well.

     Fifteen countries and territories have been blacklisted by a 29-nation task force for failing to cooperate in the fight against money laundering. The Bahamas and Cayman Islands are among them, but officials in the Cayman Islands promised in June to end tax-haven practices within five years.

     Daniel Mitchell, a tax expert at the conservative Heritage Foundation, worried that the IRS's blanket record request would affect financial privacy.

     "We should not be trying to enforce a worldwide tax regime," he said. "It tends to lead to cartel-like behavior, OPEC for politicians, for lack of a better phrase." 


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