A federal court in Tampa Bay, Florida has charged two part-time Bahamian residents with operating a tax fraud scheme involving trust, insurance and other offshore companies.
According to court documents filed earlier this month in Florida, Duane Crithfield and Stephen Donaldson allegedly ran the scheme in Anguilla, Nevis and The Bahamas. They were arrested in North Carolina and have since been released pending trial.
Both men primarily spent their time in Tampa Bay and The Bahamas, the document said.
Offshore Alert, the well-known watchdog for offshore financial centers, first uncovered the charges in U.S. federal court.
"The BPP (Business Protection Plan) strategy enabled the defendants' affluent clients to claim business expense deductions based on sham 'insurance premium' payments made to offshore entities FIC (Fidelity Insurance Company) and CIC (Citadel Insurance Company) in amounts intended to substantially reduce the clients' taxable income for a particular year," the indictment stated.
"The so-called insurance premiums were not based on actual business risks but rather on the client's interest in reducing business income for tax purposes," the document noted.
It went on to describe how clients received up to 85 percent of premiums back after obtaining the benefit of a tax deduction on the corporate income tax return.
Crithfield and Donaldson could now receive a maximum penalty of five years in prison and a $250,000 fine, if convicted.
The courts claim that both men "promoted, marketed and implemented" the BPP through various companies.
In recent months, the Internal Revenue Service (IRS) and other authoritative bodies in the U.S. have launched a renewed crackdown on tax evasion and fraudulent schemes in offshore centers.
In The Bahamas, the public and private sector is bracing for the implementation of the Foreign Account Tax Compliance Act (FATCA), which is intended to considerably boost transparency in international financial centers. Under the law, institutions are required to register with the IRS and report certain account information with respect to persons considered U.S. citizens for tax purposes.
The Ministry of Financial Services has been aggressively pursuing new horizons for growth in recent times, particular markets in South America.

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