Posted on May 02 2019
In the curious case of:
United States v. John Does (3:19-mc-00067)
Department Of Justice Press Release Number: 19-447
Western District of North Carolina to authorize the summons at the request of the government of Finland under the tax treaty between Finland and the United States. That treaty allows the two countries to cooperate in exchanging information that is necessary for carrying out each country’s tax laws. The IRS summons seeks the identities of Finnish residents who have payment cards linked to bank accounts located outside of Finland so that the Finnish government can determine if those persons have complied with Finnish tax laws. Finland has advised the IRS that, in circumstances where the payment cards are used only at ATMs or in other transactions where authorization is by PIN code, and the cardholder need not identify himself or herself to the merchant, the cardholders cannot be identified from sources in Finland.
As explained in the DOJ-OPA Release No 19-447:
the request is part of a foreign payment project being conducted by the Finnish Tax Administration (FTA), in which information on the use of payment cards issued by foreign financial institutions is used to identify non‑compliant Finnish taxpayers. Earlier FTA investigations of approximately 120 to 150 Finnish taxpayers who used foreign payment cards in a similar manner have yielded extremely high rates of tax non-compliance, as noted in the United States’ memo in support of the petition, which indicates that it is likely that the John Does sought by the summons are Finnish residents who are failing to report these foreign accounts and associated income.
As noted on Page 2 of the Court Order:
Internal Revenue Service is in receipt of a request from the Government of Finland for information pursuant to Article 26 of the Convention Between the Government of the United States of America and the Government of Finland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income and Capital, as amended effective December 30, 1990
This IRS link will take you to the Ratified Covention between the United States and Finland, Article 26 is obligations are particularized on pages 24 and 25, respectively, which reads in part:
ARTICLE 26 Exchange of Information
The competent authorities of the Contracting States shall exchange such information as isnecessary for carrying out the provisions of this Convention or of the domestic laws of the ContractingStates concerning taxes covered by the Convention insofar as the taxation thereunder is not contrary tothe Convention. The exchange of information is not restricted by Article 1 (Personal Scope). Any
information received by a Contracting State shall be treated as secret in the same manner as Information
Back to the John Doe(s) Simmons, perhaps I’m over thinking this but as the Court filings indicate these cards were used at ATMs and/or transactions that required a PIN. One would think it would be easy for the Doe(s) to be easily identified by both CCTV and Cameras installed in the actual ATMs. But then again that’s me making an assumption:
As detailed below, of which you can find the culminative totals on page 14 of the Order (previously embedded). The concentration of the ATM transactions occurred from 2013 thru 2014. In all the FTA identified 719 ATM withdrawals, all three cards were used at primarily three locations and had a cumulative total of $323,135.00
JOHN DOE, Finnish taxpayer(s) who, at any time during the period January 1, 2013 through December 31, 2014, held a payment card with the account number ending 0924 issued by Bank of America, N.A., with approximate cumulative transactions of €90,319 (about $102,450 USD).
JOHN DOE, Finnish taxpayer(s) who, at any time during the period January 1, 2013 through December 31, 2017, held a payment card with the account number ending 1123 issued by Charles Schwab & Co., Inc.. The Finnish Tax Authority (FTA) provided the IRS with the following details: the Charles Schwab Card was used at three primary locations in Helsinki and the cumulative total of €76,180 (about $86,374 USD)
JOHN DOE, Finnish taxpayer(s) who, at any time during the period January 1, 2013 through December 31, 2017, held a payment card with the account number ending 3575 issued by TD Bank, N.A. FTA disclosed 297 ATM transactions €118,459 ($134,311 USD)
Again this might not be a big deal. On one hand one could argue its the normal course of business pursuant to our Treaty Agreement with Finland. Conversely one could argue that there might (operative word) be more under the surface. Which is why the Declaration and FTA Summons should be scrutinized. Given the number of ATM transactions
You can pull down all the of the case attachments via this (paywall) link
In my opinion the granular detail can be found in O’Donnell’s 61 Page Declaration,
Such as the two request sent on June 30m 2016 and August 17, 2016, respectively, along with a “supplemental” letter on November 13, 2017 and lastly an additional email request sent on May 14, 2018. Not that it matters but the reason this was filed in the Western District Of North Carolina is all three financial institution (that issued the cards) are located in that district. Also it’s worth noting that nothing in the FTA or IRS request suggest that these financial institutions did anything impermissible. It’s the card holders, but again this seems, (hence I’m speculating) to be more than potentially three Finnish residents avoiding taxes.
I’m somewhat vexed, here’s why, in the filings FTA transmitted the summons to the IRS pursuant to the aforementioned treaty. But in the application FTA informed the IRS that they tracked and trace these three cards via an open source website (binlist) , using the Issuer Identification Number (IIN). The Finnish Government explicitly stated that “they can not identify the card holders through traditional sources) but based on the Court Order and record requests, my suspicion is this is likely a follow the money and it might (operative word) lead down a path of something far more onerous that not paying taxes.
For now I’d suggest that you keep an eye on this case because something in my gut says it’s not -just- about not paying taxes on $323K, but more likely than not who the card holders are. Not to belabor the point remember the FTA identified 719 ATM withdrawals, all three cards were used at primarily three locations in Helsinki.
The time frame might be one of the bigger clues. 2013 to 2014. Why? Well during 2013 thru 2014 the following data beaches occurred
2013 & 2014 Global Events
Target Hackers Stole Encrypted Bank PINs On Top Of 40 Million Credit Cards, Busiines Insider Report
I have really strong feelings about Kaspersky, nonetheless in early 2015 the NYTs reported what was known as “The Biggest Bank Heist” with the opening paragraph of their article notes a random ATM in Kiev started spitting out money.
Russian group behind 2013 Foreign Ministry hack:
2013 Finland’s Foreign Ministry had its systems hacked by what investigators described as ‘a state actor’. Now Yle's sources have confirmed who was behind the attack: the Turla group of Russian-speaking hackers who perpetrated attacks on targets in more than 50 countries worldwide during the same period.
Again I could be way off the mark but based on the ATM transactions, the minimal monetary tax implications: <$323K in potential taxable revenues, three ATM cards, used at the three same locations in Helsinki, it certainly raises the spector that there might be a lot under the surface.
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