3.2 Prosecuting Tax Evasion to Fight Organized or Financial Crime

Regardless of how prosecution is initiated, the agencies or units involved will have specialized knowledge and skills. Interagency teams can benefit from this specialization and avoid any potential duplication of efforts. Where more than one agency is empowered to prosecute the same types of offenses, clear guidelines will be important in determining when and how each agency will intervene. Interagency cooperation can ensure that these agencies combine efforts, exchange evidence, and use the unique procedures available.

One major benefit of increased cooperation between tax authorities and LEAs is the ability to initiate simultaneous prosecution via the national courts and specialized tax tribunals, thereby increasing the chances of success. Simultaneous prosecution can prevent suspects from evading authorities (or limit their ability to do so) and increase the likelihood of recovery of at least some of the assets. Conversely, consecutive prosecutions are more likely to fail as evidence grows stale or suspects flee or die.

A joint approach allows authorities to determine whether the evidence obtained “more clearly indicates one type of crime over another” and then to “set the case strategy appropriately” (OECD and World Bank 2018, 79). Joint teams can better handle evidence (in accordance with the rules of procedure) and ensure that a suspect’s rights and protections are safeguarded throughout the process. Tax information can act as the starting point of an investigation, but it is often not admissible as evidence in a corruption or money laundering prosecution unless it is obtained using specific procedures. In addition, although tax information, details of assets, bank accounts, or other financial transactions can be assumed to be reliable at face value, other documents may require validation or verification prior to criminal prosecution.

3.2 Prosecuting Tax Evasion to Fight Organized or Financial Crime

Organized crime offenses, corruption, embezzlement, money laundering, and other crimes may be challenging to prove, depending on the evidence collected. Sometimes, prosecutors drop a case if acquittal becomes a possibility for lack of evidence. In this situation, also charging the defendant with tax offenses may preserve a path to criminal conviction because often countries criminalize possession of undeclared revenue or assets.

In the prosecution of organized crime, the practice of charging defendants with a tax crime has been well established for almost a century. In 1927, the US Supreme Court ruled in United States v. Sullivan that illegally earned income was subject to income tax, and on June 16, 1931, Chicago gangster Al Capone famously pled guilty to tax evasion and eventually was sentenced to prison for 11 years. Criminal investigators should consider, then, charging defendants with tax offenses, in addition to organized crime, corruption, or other applicable white-collar offenses.