“Operation Atlantis” success myth shows weakness of investigative agencies in global fight against white collar criminals – Follow the Money

In the corridors of major international conferences, grand plans are often hatched that rarely come to fruition. Inspired by the headline speakers, attendees mingle and talk on the sidelines, but then everyone goes their own way and nothing comes of those conversations. 

Hans van der Vlist has attended many such events. As the then boss of the Dutch Fiscal Information and Investigation Service (FIOD), Van der Vlist was in London in November 2017 for a conference on tax enforcement hosted by the Organisation for Economic Co-operation and Development (OECD). He knows the rituals of the conferences: “Everyone tells their best stories, but that is often where it ends.”

This time it was different.

Van der Vlist and his fellow directors from foreign tax investigation agencies have been convinced for years that more collaboration is urgently needed to crack down on white-collar criminals worldwide. 

As soon as a national border is crossed, these crooks know that their pursuers – tax investigators – face major obstacles. Money launderers and tax evaders can turn to numerous tax service providers, which are often located in financial capitals and happy to help – for a hefty fee. 

Naturally, the international fight against white-collar criminals and tax evaders was one of the main themes at the OECD conference attended by Van der Vlist in 2017. Collaboration between investigative journalists had brought the issue to the fore. 

A year-and-a-half earlier, more than 370 journalists from news organisations in dozens of countries had shocked the world with the Panama Papers investigation. An enormous data leak at the now-defunct Panamanian law firm and trust company Mossack Fonseca enabled the journalists to search through 11.5 million secret documents for more than a year.

Mossack Fonseca set up companies in Panama and the Virgin Islands for wealthy clients to keep their assets out of sight. Its clients had never had to worry before, but suddenly the details of their hidden assets were being published by countless news outlets worldwide. 

The consequences were unprecedented: disgraced politicians resigned, governments collapsed, and authorities all around the world launched investigations into tax evasion and money laundering.

These journalistic successes were discussed extensively at the OECD conference. During one of the plenary sessions, there was a call to take up the fight against the tax service providers, the facilitators, which assist white-collar criminals.

Van der Vlist took up that challenge. “During the break, I was drinking coffee with my colleague Simon York (the then-director of the Fraud Investigation Service at His Majesty’s Revenue and Customs (HMRC), the British tax authority.). ‘Let’s do something on a smaller scale, as a kind of catalyst,’ I suggested. York was interested and then we took the initiative together.”

Just like the secret services

Operational cooperation – which mainly means exchanging information – was the most important element in the “thing” that Van der Vlist and York wanted to start. This was urgently needed because, in practice, money launderers know how to operate quickly, and like to use innovative financial service providers to do so – while cooperation is extremely complicated for tax investigation authorities. 

Former FIOD investigator Peter van Leusden described his often difficult attempts to obtain information from foreign authorities.

“In Brazil, I once had to work through a liaison to submit a request for legal assistance,” he said. “That took up an enormous amount of time. That is the problem with international cooperation: via official channels, you often end up (…) with a lot of paperwork. If you don’t know anyone on the other end of the line, it can take you six months to a year.”

Short lines of communication are key, which is why a compact set-up was desirable

Sharing information is crucial, but usually challenging and complex, according to Van der Vlist. “You keep running up against the limits of what is legally permitted in different countries: what can you exchange and what can’t you?”

Short lines of communication are key, which is why a compact set-up – in which the leaders of the relevant government services play a major role – was desirable. 

Van der Vlist and York were inspired by the Five Eyes intelligence alliance, which was set up by the secret services of the United States, Great Britain, Canada, Australia and New Zealand after the Second World War .

Their work came to fruition in the summer of 2018, when the tax and investigative services of the United States, Great Britain, Canada, Australia and the Netherlands started working together as the Joint Chiefs of Global Tax Enforcement, abbreviated as the J5. 

Six years on, an analysis by Follow the Money has scrutinised the claims of success made by J5 – particularly the case which it claimed as its first international success, involving a minor bank in Puerto Rico – and revealed concerns about the taskforce’s ability to secure major results, rather than simply share information. 

Operation Atlantis

It may be remarkable that the Netherlands is the only EU country in the J5, but it is not that strange. 

Formally (and informally), there has been good communication between the heads of the tax investigation services of the five countries for some time; this has a lot to do with the status of the Netherlands. Although there is debate among criminologists about the precise description – is the Netherlands currently a “narco-state” or not? – it is clear that the country plays a major part in global crime.

According to Italian crime journalist Roberto Saviano, this is not only because the Netherlands is a logistics hub for drug trafficking, but more so because of the financial services sector. 

“What makes you (the Netherlands) one of the most criminal countries in the world is your economic system: you have become an offshore area,” he said after the murder of Peter R. de Vries in an interview in Dutch newspaper NRC in 2021. 

It is a stance shared by Van der Vlist. “The Netherlands is undeniably a linchpin in global crime,” he told Het Financieele Dagblad in 2020.

From the beginning, the FIOD took its role in the J5 seriously. In November 2018, the FIOD organised the first ever J5-event, called The Challenge.

The first target or “professional facilitator” that properly came into the picture was a small Caribbean bank

At the FIOD office the members brought together their “most prominent data experts, technology experts and investigators for a week for a coordinated offensive to track down people who earn their income by facilitating and enabling international financial and fiscal crime,” according to the press release that was issued shortly afterwards. There is no secrecy about the J5’s objectives: the targets that come into the sights of the J5 members will be tackled “by means of a coordinated international action”.

The first target or “professional facilitator” that properly came into the picture was a small Caribbean bank: the Euro Pacific Bank, based on the Caribbean island of Puerto Rico. The FIOD was instrumental: it had managed to obtain specific financial information about the bank and shared it with the J5 partners. Thus started the first J5 action: “Operation Atlantis”.

Dr. Doom

Puerto Rico, unlike Atlantis, is not a mythical kingdom. The archipelago east of Haiti has been part of the unincorporated territory of the United States since the late nineteenth century. In other words, Puerto Rico belongs to the US without actually being part of it. 

The nation has its own constitution and legal system, but is under the sovereignty of the US Congress. This means, among other things, that the islands are under the supervision of the Internal Revenue Service (IRS), which is a J5 member.

Peter Schiff, the American founder of the Euro Pacific Bank, was well aware of this. He is a libertarian-minded economist who enjoys some fame in the United States. He has 1 million followers on X, writes books, makes podcasts and regularly appears on television – Fox News – to give his commentary on economic events. Schiff was one of the few who foresaw the financial crisis of 2007-2008. He owes his nickname to that: Dr. Doom.

Schiff is an asset manager and entrepreneur. The financial crisis of 2007-2008 prompted him to start a new financial institution, one that would be safer than existing banks. He wanted a bank that did not provide loans and where all credits were backed by the assets; a so-called full reserve bank, or a deposit bank.

But then the J5 struck: in January 2020, the IRS visited Schiff’s home in Puerto Rico

The bank made its money by offering innovative services. For example, customers who own gold or silver would be able to pay with these precious metals via well-known payment cards – such as Visa or Mastercard.

Schiff’s deep-rooted aversion to taxes was one of the reasons that he established Euro Pacific Bank in 2011 on the island group of Saint Vincent and the Grenadines, a tax haven in the southeastern part of the Caribbean Sea. However, Schiff’s ambitions required agreements with major credit card companies, and they prefer not to do business with small banks in obscure parts of the world that lack significant financial supervision.

He therefore moved his bank to Puerto Rico in 2017. Euro Pacific Bank subsequently managed to establish official relations with the Federal Reserve Bank of New York, one of the twelve central banks in the United States. The bank was also well on its way to doing business with credit card company American Express, Schiff claimed. But then the J5 struck: in January 2020, the IRS visited Schiff’s home in Puerto Rico.

“The J5 is closing in”

“The law enforcement officials wanted information about a number of our bank’s customers,” Schiff told Follow the Money by phone. “I then asked whether the bank was the subject of the investigation. They denied that, it was about those customers. It later became clear that this was the case, and there even appeared to be an international partnership behind the investigation: the J5. Including the tax investigation services of no fewer than five countries. It’s unbelievable that so many countries were involved in an investigation into a tiny bank like ours.”

Regarding Euro Pacific Bank, “tiny” is an adequate description. In 2017, the bank had a balance sheet total of approximately 170 million dollars. In 2020, according to Schiff, that was 128 million dollars. By comparison, the balance sheet total of the largest Dutch bank, ING, was 975.5 billion euros for 2023. Meanwhile, that of Triodos Bank, one of the smallest banks in the Netherlands, was 23.2 billion euros for last year.

Don Fort, the head of the IRS branch that deals with criminal investigations, was lyrical about the J5

A few months after Schiff’s home was visited, the J5 published a document listing its successes. Don Fort, the head of the IRS branch that deals with criminal investigations, was lyrical. 

“The sum of all the parts makes the J5 an exponentially more efficient and successful organization. It is not a good time to be a tax criminal on the run – your days are numbered,” he stated in the document. However, the successes listed mainly concerned the exchange of data and participation in conferences; there is no mention of unravelled networks, arrested suspects or recovered money.

Simon York of HMRC was no less enthusiastic: “Being in the J5, we have five times the analytical capacity, five times the data and five times the insight to get the job done. Our message to criminals is clear: no matter how safe you think you are, the J5 is closing in.”

Schiff only found out about the J5 in the autumn of 2020. Investigative journalists from The New York Times, the Australian newspaper The Age and the Australian version of the well-known television program 60 Minutes had gotten wind of Operation Atlantis.

Both newspapers prominently featured the international cooperation between the members of J5. “Chasing Illicit Money, Global Officials Circle a Puerto Rican Firm”, was the headline in The New York Times. The Age went with: “The Day the International Tax Authorities Came Knocking”.

The 60 Minutes show was titled “Operation Atlantis”. In the opening segment, the reporter sat opposite Schiff and said: “Your bank is at the centre of the biggest tax evasion in the world.”

The Age described Schiff’s bank in another article as a “top-level” threat, because organised crime in Australia could be using its services. As many as 100 Australians were said to be under investigation and could face jail time. “The investigation was prompted by a major leak of the bank’s financial data, which was first obtained by Dutch authorities and, later, the J5,” according to the article in The Age.

J5 hails “milestone” action

Almost two years later – in mid-2022 – Euro Pacific Bank had to close its doors, but not because it facilitated tax evaders and money launderers. Although the IRS, working on behalf of the J5, suspected the bank of criminal acts, it was never able to substantiate those suspicions and a summons was never issued. It was Puerto Rico’s financial regulator, the Oficina del Comisionado de Instituciones Financieras (OCIF), which announced on 30 June 2022 that Euro Pacific Bank had to suspend its activities. According to the regulator, the bank was not sufficiently funded. Since then, the bank has been in liquidation.

Schiff told Follow the Money that the OCIF’s decision was “totally unnecessary”.

“It is true that the bank was making losses and at one point there was a deficit,” he said. “To a large extent, that was due to the bad press that caused our customers to leave. But I was in talks with the OCIF and had just deposited 2 million dollars of my own accord and from my own resources. I had also found a buyer for the bank, but the OCIF nevertheless felt it was necessary to close the bank down.”

The J5 – which coincidentally celebrated its fourth anniversary that week – thought differently. In a press release issued the same day as the OCIF’s announcement, the alliance praised the Puerto Rican regulator’s action as a “milestone”.

“When we launched the J5, we were determined to make the world a smaller place for tax evaders,” said Simon York of the British HMRC. According to him, the closure of the bank was proof that “our approach is working”.

Niels Obbink, general manager of the FIOD, added his two cents and emphasised that Operation Atlantis owed its existence to the intelligence that the FIOD wanted to share with the other partners. “These international results prove how much value there is to the J5 collaboration,” Obbink said.

No hard evidence

The J5 press release did not mention that its investigation failed to yield any hard evidence of criminal acts by Euro Pacific Bank. In a separate statement, IRS chief Jim Lee did say that something special was going on: “This is what we would call a non-traditional component within an investigation – there is no indictment of the bank or those running it today.” 

The journalists at 60 Minutes were also unable to provide hard evidence, as became apparent when Schiff took the TV program to court in Australia in 2023. 

The program – Channel Nine’s journalistic flagship – claimed in the broadcast about “Operation Atlantis” that Schiff had deliberately created a means for his clients to commit tax fraud, and to hide and launder the proceeds of crime through Euro Pacific Bank. 60 Minutes claimed that he had deliberately helped 100 Australians evade taxes through his bank and that he was part of organised crime, and therefore poses a threat to Australia.

“I want to know if the IRS had a hand in the Puerto Rican regulator taking action against my bank”

In November 2023, Schiff won the lawsuit. The judge ordered Nine Network to pay 550,000 Australian dollars (330,000 euros) plus Schiff’s legal costs. Schiff estimated these at 1 million Australian dollars.

And at the end of July 2024, Schiff also filed a lawsuit against the IRS over a rejected information request. That caused a stir. “IRS Sued by Economist After His Bank Was Shut Down”, Newsweek headlined. Schiff is demanding information relating to him and Euro Pacific Bank that the IRS previously refused to provide, despite his appeal to the US Freedom of Information Act (FOIA).

“I want to know if the IRS had a hand in the Puerto Rican regulator taking action against my bank. My goal is to get the facts,” Schiff said.

Once he has those, Schiff might sue for real. One of the possible targets is the IRS, he explained. “They bear the greatest responsibility.”

“PR stunt” or success?

The fact that Operation Atlantis did not lead to the prosecution of Euro Pacific Bank does not mean that the information shared by the FIOD did not yield any results. Customers of Euro Pacific Bank have since been prosecuted in both the UK and the Netherlands. The FIOD also handed over information to the tax authorities that identified 99 customers of the bank. “As of December 1, 2023, five files are still open. The total proceeds as of December 1, 2023, amount to 4 million euros,” a FIOD spokesperson said. 

The information also led to investigations outside the J5, including in Belgium, where 57 clients of Euro Pacific Bank are said to be under scrutiny from the tax authorities. “Four files have been settled, with claims totalling approximately 800,000 euros in back taxes, including fines and tax increases,” the Flemish business newspaper De Tijd reported in March.

These are respectable amounts, but certainly not sums that indicate that Operation Atlantis has dealt a heavy blow to international money launderers and tax evaders. In light of the billions that, according to various estimates, are earned annually by criminals, it is peanuts.

At the end of July 2024, the J5 published a report that once again emphasised the importance of international cooperation, while also listing a number of its successes. One of the “highlights” listed was the investigation into Euro Pacific Bank.

“My conclusion? Euro Pacific Bank has become the victim of a PR stunt, entitled Operation Atlantis”

In response to this, Schiff said: “Of the 65 people we employed at the bank, 30 worked in the compliance department. We set the bar very high. There is a chance that some people slipped through, but there is no evidence that Euro Pacific Bank was a deliberate facilitator of tax evaders and money launderers. After years of investigation by an international collaboration, nothing remains of the suspicions against my tiny bank.”

“Nevertheless, the J5 is still cheering about a non-existent success,” he added. “My conclusion? Euro Pacific Bank has become the victim of a PR stunt, entitled Operation Atlantis.”

A different model 

Within the Netherlands Public Prosecution Service, some look at the J5 with pity.

“The meetings provide great photo opportunities for the top bosses, but their effectiveness is questionable,” insiders told Follow the Money. Ultimately, it is not the “chiefs” who do the work, but the people lower down in the alliance, they said.

But at that level, the collaboration within the J5 mainly comes down to “knowledge transfer about incidents” that the officials within the various investigative services observe. Such contacts – which take place a few times a year – are valuable, but the image that joint international operations are being conducted is incorrect, according to the sources. 

So-called joint investigation teams (JITs) have never been set up within the J5. Mutual assistance with requests for legal assistance is the core of the collaboration.

“The contacts that form the basis for this have existed between the members of the J5 for much longer,” said former FIOD investigator van Leusden. “JITs would be a welcome addition.”