United States: U.S. Assists Finland In Investigation Of Payment Cardholders For Unreported Income Via John Doe Summons - Will The Use Of LLCs And Trusts Conceal Their Identities?

The United States petitioned the court to authorize the summonses at the request of the government of Finland under the income tax treaty between Finland and the United States.

On May 1, 2019, the United States Department of Justice announced that a U.S. federal court had authorized the Internal Revenue Service (IRS) to serve a so-called "John Doe" summons1 to several U.S. financial institutions. The summonses seek information about persons residing in Finland who have payment cards linked to bank accounts located outside of Finland. As stated in a Department of Justice press release: "The Department of Justice and the IRS are committed to working with the United States' international treaty partners to identify and stop individuals using hidden offshore accounts to evade tax laws... The United States does not tolerate offshore tax evasion, nor does it sanction tax evasion committed through U.S. financial institutions."

The Proceeding Is Pursuant to the U.S.-Finland Tax Treaty

The United States petitioned the court to authorize the summonses at the request of the government of Finland under the income tax treaty between Finland and the United States. That treaty permits the exchange of information that is necessary for carrying out each country's tax laws. The summonses seek 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.

The Cardholders' Identities Are Not Known to Finnish Tax Authorities

Finland has advised the IRS that when a card connected to a foreign financial institution is used only in ATM machines in Finland, or when the authorization of the payment is done by PIN code without identification of the cardholder, the cardholder(s) cannot be identified from information sources in Finland. As described in the documents filed by the United States, Finland's request for assistance 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 noncompliant Finnish taxpayers. Earlier FTA investigations have revealed extremely high rates of tax noncompliance. The issuing banks are the only sources for the information sought by the proposed summonses that is available to the FTA or the IRS, other than the unidentified taxpayers themselves.

What Information Will Be Produced to the FTA?

It is likely that the summonses will seek the following information for the period of January 1, 2013, through December 31, 2017:

  1. Account signature cards
  2. Account applications
  3. Monthly or periodic account statements
  4. Canceled checks (both sides)
  5. Credit and debit memos and advices
  6. Wire transfer authorizations
  7. Deposit slips and deposited items
  8. Cashier's checks
  9. Money orders
  10. Letters of credit
  11. Safe deposit box rental agreements
  12. All correspondence, including but not limited to letters, memoranda, telegrams, telexes, facsimiles, email and letters of instruction
  13. Memorandum files and/or desk files maintained by the bank or its officers or employees (including specifically employees of any private banking department) reflecting communications between the bank and its client or others acting on the client's behalf, and documenting actions taken pursuant to directions received from the client or on his/her behalf; and reflecting any thoughts or decisions of the bank or its employees or officers regarding the account
  14. "Know your customer" files or similar records required by local law or practice for anti-money laundering purposes.

The Cardholders' Identities May Be Shielded by an LLC or Trust

However if the cardholder is an entity, the true owner of the card's identity may not be readily available. For instance, for the years at issue, if the cardholder is a Delaware LLC, the identity of the owners may be very difficult to determine. Some Delaware incorporation services companies promote the high level of privacy afforded by a Delaware LLC in their marketing materials. For instance:

A Delaware LLC filed through a professional Registered Agent affords you the highest level of confidentiality. Only the company name and the name and address of the Registered Agent typically appear on the Certificate of Formation, along with the date of filing and the company file number.

Here is what Delaware LLC privacy offers: No information about the members or managers is required to be listed on the Certificate of Formation, and the Delaware Division of Corporations does not request, obtain or store any information regarding the LLC's members and managers.

Your Delaware Registered Agent is required, however, to maintain a record of the contact person for the LLC, including the contact person's address. The contact person must be an actual person who is at least 18 years of age.

The contact person does not have to be a member or manager of the LLC and does not need to reside in the United States or be a United States citizen.

Note: Only in recent years (but not in the years for which the Finnish government is seeking assistance) does the United States require that names of the single-owned LLCs be furnished to the U.S. Internal Revenue Service.

South Dakota trust companies likewise promote the privacy provided by South Dakota legislation governing trusts, with marketing such as:

South Dakota's trust laws emphasize privacy. South Dakota's Quiet Trust benefits mean the trustor can restrict and even conceal the existence and information about a trust from a trustee. Additionally, sealing trust records from public view is as easy as petitioning the court. These strong privacy laws help protect family assets from spouses, the prying public, and foreign governments looking to collect taxes.

International families looking for a safe harbor to secure their wealth have often sought South Dakota's trust benefits. These benefits work for the grantor and beneficiaries for generations to come. With global recognition, South Dakota's laws are crafted to effectively safeguard large amounts of wealth.

If the cardholder whose identity is sought by the John Doe summons is an LLC or trust, the FTA could make a second request under the treaty and ask the IRS to issue a summons to the LLC or the trust, which may in turn reveal the identity of the real person or "warm body" behind the entity and the card. But that effort could lead to legal proceeding objecting to the summons (such as a motion to quash) issued to the LLC or to the trust, which would at least delay the FTA from securing the information and possibly block a response should the court quash the summons.

John Doe Summonses Are Frequently Used to Identify Beneficial Owners

The John Doe summonses issued in this matter are not unusual. They are part of ongoing international efforts by the United States and its treaty partners to stop persons from using foreign financial accounts to evade taxes. Courts have previously approved John Doe summonses allowing the IRS to identify individuals using offshore accounts to evade their U.S. obligations, and have also approved John Doe summonses to be used to identify individuals using U.S. financial institutions or accounts to evade foreign tax obligations.

  • In 2000, the IRS obtained authorization to serve a John Doe summons upon American Express and MasterCard International seeking account records of United States taxpayers who held an interest in American Express or MasterCard payment cards issued by banks in Antigua, Barbuda, the Bahamas or the Cayman Islands. See: In re Tax Liabilities of John Does Who During the Years Ended December 31, 1998 and 1999, Had Signatory Authority Over American Express or MasterCard Credit, Charge or Debit Cards, Case No. 00-cv-3919, 2000 WL 34538137 (S.D. Fla. Oct. 30, 2000);
  • In 2002, a federal court authorized the issuance of a John Doe summons upon Visa International seeking the identity of United States taxpayers who held certain credit card accounts with ties to foreign banks. See: In re Tax Liabilities of John Does Who During the Years Ended December 31, 1999 through December 31, 2001, Had Signature Authority Over Visa Cards, No. 02-mc-00049 (N.D. Cal. Mar. 27, 2002);
  • Also in 2002, the IRS received permission to serve a John Doe summons upon MasterCard International seeking the identity of United States taxpayers who held certain credit card accounts with ties to foreign banks. See: In re Tax Liabilities of John Does Who During the Years Ended December 31, 1999 through December 31, 2001, Had Signature Authority Over MasterCard Payment Cards, No. 02-22404, 2002 WL 32879613 (S.D. Fla. Aug. 20, 2002);
  • In 2011, a federal court authorized service of a John Doe summons upon HSBC India seeking financial account records establishing the identities of United States taxpayers with Indian bank accounts. See: In re HSBC India, No. 11-cv-1686 (N.D. Cal. Apr. 7, 2011).

What Can Finnish Taxpayers at Risk of Disclosure Do?

The Internal Revenue Code (IRC) permits persons to object to the issuance of summons where, for instance, the summons is directed to a financial institution and seeks the records of a particular person. The IRS is required to give that person notice of the proceedings and to advise that person of their rights to intervene. However, in the case of John Doe summonses, no such intervention is contemplated by the IRC, and no notice is provided because the persons under investigation are not known to the IRS.

However, after the summons has been issued, as is the case here, there is authority for intervention to object to the enforcement of the summons by affected persons, and they may do so on an anonymous basis. For instance, in United States v. Coinbase, Inc., Case No. 17-cv-01431 (N.D. Cal. 2017), the IRS had obtained a court order permitting it to serve a John Doe summons to Coinbase, Inc. Coinbase refused to comply with the summons and the government brought an enforcement case in federal district court. Coinbase is an exchange that deals in convertible virtual currency, operating a bitcoin wallet and exchange business. The purpose of the John Doe summons was to permit the IRS to determine whether Coinbase customers were properly reporting gains from the sale or exchange of their virtual currency. 

The issue before the court was whether an anonymous Coinbase customer (John Doe 4) could intervene on an anonymous basis in the enforcement action. The court permitted the unnamed customer to intervene in the enforcement proceedings. U.S. v. Coinbase, No 17-cv-01431-JSC D. CO Order Re: Motions to Intervene dated July 18, 2017.

It is highly improbable that the financial institutions involved in the current John Doe Summons will resist providing the requested information. But, the proceedings are now beyond the issuance (of the summons) stage. Now the question is: Would a court permit an unnamed Finnish citizen to intervene in the process at this stage? Time will tell.


1 A John Doe summons is a summons that does not identify the person with respect to whose liability the summons is issued. The Internal Revenue Code authorizes the IRS to issue a John Doe summons pursuant to an investigation of a specific, unidentified person or ascertainable group or class of persons.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions