![](https://taxjustice.net/wp-content/uploads/2020/07/P1130076_01-1-150x150.jpg)
Andres Knobel ■ US appeals court confirms firm must disclose to IRS names of clients behind offshore bank accounts and foreign entities
![gavel-close-up Close up of a gavel](https://taxjustice.net/wp-content/uploads/fly-images/5219/gavel-close-up-1-scaled-1400x600-c.jpg)
On 24 April 2020 the US Court of Appeals for the fifth circuit ruled that a US law firm must disclose to the US tax authority (the Internal Revenue Service) the names of requested clients in connection to an investigation. Specifically, the Internal Revenue Service (IRS) had asked for documents identifying any US clients at whose request or on whose behalf the law firm had acquired or formed any foreign entity, opened or maintained any foreign financial account, or assisted in the conduct of any foreign financial transaction, including records or other data relating to setting up offshore financial accounts and the acquisition, establishment or maintenance of offshore entities or structures of entities.
The issue at stake was whether attorney-client privilege would allow the law firm to reject the summon. It didn’t.
The law firm, however, wasn’t picked at random. The ruling describes that the investigation arose because during the audit of a US taxpayer, it was revealed that the taxpayer hired the law firm for tax planning. This was accomplished by establishing foreign accounts and entities, and executing subsequent transactions relating to said foreign accounts and entities. Specifically, from 1995 to 2009, the taxpayer engaged the law firm to form eight offshore entities in the Isle of Man and in the British Virgin Islands and established at least five offshore accounts, so the taxpayer could assign income to them and, thus, avoid US income tax on the earnings.
The case is interesting, but it reflects that enablers’ secrecy tools won’t be easy to dismantle. This ruling doesn’t suggest at all that the IRS can send fishing expeditions to any law firm to find tax abusers. Instead, it appears that the fact that there was a possibility – but not certainty – that these (unknown) US clients had violated tax regulations is what allowed the IRS to overcome attorney-client privilege.
Lawsuits require judges to interpret and apply the law to one particular case. But we should take a step back and ask ourselves whether the law itself makes sense, or if it needs to be reconsidered.
As we have recently written in an earlier blog on this case, attorney-client privilege is just the tip of the iceberg in facilitating illicit financial flows. Attorney-client privilege is abused not just for tax abuse purposes, but for money laundering as well, as warned by the Financial Action Task Force.
To sum up, this ruling is a step forward in the right direction. It goes along other transparency initiatives addressing enablers’ secrecy such as the obligation to disclose aggressive tax planning arrangements and other schemes used to circumvent automatic exchange of information or to hide the beneficial owner behind opaque structures. However, there is still much further to go.
Related articles
![Flags of countries in front of the United Nations Office at Geneva-PEXELS Flags of Countries in front of the United Nations Office at Geneva](https://taxjustice.net/wp-content/uploads/fly-images/17845/Flags-of-countries-in-front-of-the-United-Nations-Office-at-Geneva-PEXELS-scaled-380x210-c.jpg)
🔴Live: UN tax negotiations
![A large sculpture of face sits in the middle of a garden hedge maze - UNSPLASH A large sculpture of face sits in the middle of a garden hedge maze](https://taxjustice.net/wp-content/uploads/fly-images/18379/A-large-sculpture-of-face-sits-in-the-middle-of-a-garden-hedge-maze-UNSPLASH-380x210-c.jpg)
Another EU court case is weaponising human rights against transparency and tax justice
![People walk across a road crossing in a city on a bright day - UNSPLASH People walk across a road crossing in a city on a bright day](https://taxjustice.net/wp-content/uploads/fly-images/18347/People-walk-across-a-road-crossing-in-a-city-on-a-bright-day-UNSPLASH-scaled-380x210-c.jpg)
Our future is public, and tax justice can get us there
Submission to Special Rapporteur on the independence of judges and lawyers on undue influence of economic actors on judicial systems
![An airplane wing over a sea dotted with many cargo ships in the daytime - UNSPLASH An airplane wing over a sea dotted with many cargo ships in the daytime](https://taxjustice.net/wp-content/uploads/fly-images/18336/An-airplane-wing-over-a-sea-dotted-with-many-cargo-ships-in-the-daytime-UNSPLASH-380x210-c.jpg)
Bonn Climate Change conference again shows climate finance needs better tax governance. Start with harmful incentives.
How corporate tax incentives undermine climate justice
20 June 2024
Profit shifting by multinational corporations: Evidence from transaction-level data in Nigeria
5 June 2024
![OECD podium - U.S. Department of State from United States, Public domain, via Wikimedia Commons OECD podium](https://taxjustice.net/wp-content/uploads/fly-images/16449/OECD-podium-U.S.-Department-of-State-from-United-States-Public-domain-via-Wikimedia-Commons-380x210-c.png)
Litany of failure: new briefing sets out OECD’s manifold shortcomings in international tax talks
![Outline of Africa (cover image from report) Outline of Africa filled with water, forests, money to represent Africa's climate finance](https://taxjustice.net/wp-content/uploads/fly-images/18104/Cover-image-for-blog3-1-380x210-c.png)
Financing Africa’s Climate Action
![ab062332-0d4e-45f5-ab59-ad1d7a074939](https://taxjustice.net/wp-content/uploads/fly-images/18119/ab062332-0d4e-45f5-ab59-ad1d7a074939-380x210-c.jpeg)