Tax evasion in T&T has reached the extent of being among the top five categories of suspected criminal conduct leading to money laundering.
Tax evasion practices and indicators have been seen by the Financial Intelligence Unit which has sent nearly 300 suspected cases to the Board of Inland Revenue in the last seven years, says FIU director Susan Francois.
She spoke about the situation on Wednesday when a Special Select Committee of Parliament interviewed stakeholders on the Income Tax Amendment bill.
The SSC reports to Parliament today on the bill which the Opposition has refused to support in current form. The bill seeks to comply with Global Forum tax information exchanges to prevent tax evasion.
The Caribbean Financial Task Force (CFATF,) which is also seeking implementation of the bill, has set today as the deadline for passage.
Francois said the bill will assist FIU with taxpayer information to determine if earnings are legitimate. She noted that tax evasion is criminal conduct which can lead to money laundering offences.
“Based on FIU analysis over the years, we’ve encountered many cases of suspected tax evasion and we’ve seen indicators,” she added.
Tax evasion indicators noted by FIU, she said, included:
• Co-mingling of funds: putting business processes into personal accounts.
• Large deposits of cash put into personal accounts with unverifiable explanations.
•Reporting entities may not get clear explanations for the source of funds.
•Depositors may use night safe mechanisms for cheque/cash deposits.
• Business funds repatriated abroad with no reasonable explanation of why the money is going that way.
• Structured deposits to beat the reporting threshold fund limits: using numerous/repeated deposits that get past that threshold.
• Complex transactions which hide who actually owns the money so tax liability is avoided.
Francois added, “FIU analysis over 2011 to now has consistently identified tax evasion as among the top five categories of suspected criminal conduct leading to money laundering.”
“From 2011 to 2018 we sent nearly 300 reports to the BIR chairman on suspected cases of tax evasion and the amount of money in suspected cases is pretty high. In terms of categories, it’s generally Number Three or Four in Illicit Proceeds,” she said.
Francois spoke about FIU’s recent report of encountering about (TT) $22 billion worth of Suspicious Transaction Reports (SARS) going through the banking system and the implications of this.
She said the $22 billion identified involved both completed and an attempted transaction, which together totalled approximately (TT)$20 billion.
“The fact that the reporting entity was able to stop the attempted transaction from entering into the financial system shows the extent of their due diligence and implementation of their legal obligations under the Anti-Money Laundering and Counter-Terrorism obligations,” she said
One was a fraudulent transaction and the other, a completed transaction. However, she said there was insufficient found by the reporting entity and FIU to reach the threshold of reasonable grounds to suspect the transaction was related to money laundering.
“We’re dealing with it as a Suspicious Activity Report and it’s undergoing analysis as we get more information. The FIU’s mandate is to follow the money from the source and identify where it came from and its ultimate destination, to determine if it’s legitimate earnings, whether from criminal conduct or if it’s intended for use by terrorists,”
She said a SAR doesn’t always mean the person at issue is perpetrating a criminal act but was meant to determine if to clear the person or pass the information on to law enforcement.
On the effects of money laundering on countries like T&T, Francois said, money laundering originates from criminal proceeds from crimes: human trafficking, trafficking in arms/ammunition, corruption, extortion, murder, bribery, kidnapping fraud, robbery, theft.
“All these crimes generate money which can be laundered. If the criminal is allowed to be successful in money laundering what happens is the old adage—crime really pays,”
“So there will be nothing to stop people from continuing to do crime because benefits are being reaped. Too often it’s said money laundering is a ‘white collar crime’ but money laundering occurs after a crime which generates the money. Without the first crime, there can be no money laundering. So one has to consider the consequences of crime going unchecked and criminals benefitting without anyone stopping them—that’s the consequences we face.