18 January 2013, the heads of the tax authorities of the BRICS countries – Brazil, Russia, India, China and South Africa – issued a joint communiqué that identified seven areas of tax policy and tax administration, for extending their mutual cooperation. It followed the first meeting of the heads of revenue in New Delhi.
The seven areas of mutual cooperation include contributing to development of international standards on international taxation and transfer pricing taking into account the aspirations of developing countries in general and BRICS Countries in particular. The other areas of cooperation are strengthening the enforcement processes, sharing of best practices and capacity building, sharing of anti-avoidance and non-compliance practices and promotion of effective exchange of information.
The most important next step in further cooperation is agreed to be the sharing of best practices and information with a view to combating international tax evasion and avoidance. A “central contact point” will be established in each country to facilitate communication on international tax and transfer pricing issues. A paper on base erosion and profit shifting and to establish a governance framework was also promised for May 2013
14 January 2013, the Cayman Islands Monetary Authority (CIMA) began formal consultation on corporate governance proposals that aim to enhance and clarify corporate governance in line with international standards. CIMA stressed that this was the commencement of a consultation process only and not agreed regulatory reforms.
The corporate governance proposals seek to recognise the international character of Cayman’s financial services market and provide continued protection of the Cayman Island’s financial services sector, its consumers and investors.
CIMA is proposing to extend the application of the Statement of Guidance (SOG) to registrants and to update the SOG to incorporate key principles and standards expected of regulated entities, their management and board of directors.
CIMA is proposing to develop a public database, searchable online, providing high level information on regulated entities to facilitate the due diligence process. The database would incorporate all sectors and would contain information relating to licensees and registrants alike. It is envisaged that the database be searchable using the regulated entity’s name. Once a search is conducted, the database will provide, as a minimum, the name/s of the entity’s directors and its registered office.
The proposals include a recommendation to amend the Companies Management Law to enable the regulation and supervision of individuals offering themselves or acting as directors of six or more Cayman-registered entities. The intention is to better define and regulate directorship services by allowing the CIMA to assess and approve persons acting as directors as a profession. This approval process is to receive assurance that the persons being offered and acting in this capacity have a sound financial background and are sufficiently competent and experienced to act as directors.
To support the realignment of the supervision of directorship services, CIMA proposes implementing a requirement for all directors of regulated entities, who are not being approved as directors of licensees or via the “professional” director route (the Companies Management Law amendment) to register with the Authority. This registration would entail a proposed director providing personal and contact details; information regarding the role; the director’s experience and knowledge of the sector s/he will be overseeing; and information regarding any previous or on-going regulatory, legal or judicial enforcement action against the director. This information would be submitted together with an entity’s registration documents or, if the appointment occurs after registration, upon appointment.
Simultaneous with the consultation, CIMA has commissioned a survey canvassing the funds industry for their views on certain corporate governance considerations relating to the funds sector.
CIMA managing director, Cindy Scotland, said: “The consultation and survey both present an important opportunity for industry stakeholders to provide input into the process and contribute to shaping the future of the mutual funds regulatory framework in a manner that retains the Cayman Islands’ position as the leading jurisdiction for mutual funds formation.”
Following publicity in local and international media in respect of the database proposal, CIMA clarified that the names of Cayman Islands-regulated funds are currently searchable and available on CIMA’s website, and have been for a number of years. The database referred to would be part of the corporate governance proposals recently announced and, if adopted, would be an extension of the current system.
25 March 2013, at a meeting of 17 euro zone finance ministers Cyprus secured a last-minute deal for a €10bn bailout with international lenders. The agreement, which avoided a controversial levy on bank accounts but will force large losses on big deposits in the island’s two largest lenders, enabled the European Central Bank (ECB) to keep its emergency lifeline open to Cypriot banks.
The new programme will see Laiki Bank, the country’s second largest and most troubled financial institution, close. Its €4.2bn in deposits over €100,000 will be placed in a “bad bank”, such that they could be lost entirely. Both junior and senior bondholders in Laiki will be wiped out, a first for a euro zone bailout country; in other bailouts, senior bondholders have not faced such losses.
The remaining smaller deposits at Laiki will be transferred to Bank of Cyprus, the nation’s largest lender, which in turn will be shrunk and completely restructured. Deposits over €100,000 in Bank of Cyprus will be frozen and could see significant losses once the lender is restructured and recapitalised. Bank of Cyprus will also inherit the €9bn that Laiki owes the ECB.
Unlike the original proposed bailout agreement, which included a 6.75% levy on deposits under €100,000, only large deposits in Laiki and Bank of Cyprus will suffer losses. Combined, the two banks account for about half of all deposits in the country.
No bailout money is to be used to recapitalise Bank of Cyprus; instead shareholders and bondholders will be hit. It is thought depositors with more than €100,000 at the bank will also be involved in its recapitalisation to get up to EU-mandated capital levels and are expected to face losses of around 30%.
The ECB had threatened to cut off funds supporting Cypriot banks, which would have precipitated the island’s exit from the euro if the emergency meeting had not reached an agreement. Wolfgang Schäuble, Germany’s finance minister, said the goal was to shrink the Cypriot banking sector to the European average of three-times national output, rather than its current size of seven times.
The plan did not require the approval of the Cypriot parliament because the losses on large depositors are to be achieved through a restructuring of the island’s two largest banks rather than a tax. The new bailout deal will hit foreign investors, particularly Russians, hard. Russian nationals are estimated to hold more than €20bn of the €68bn deposited in Cypriot banks.
Cyprus had hoped to secure a rescue package from Russia, but the government was forced into fresh negotiations with its lenders – the EU, the IMF and the ECB – after the Cypriot finance minister, Michalis Sarris, failed to strike a deal in Moscow the previous week.
17 February 2013, G20 finance ministers meeting in Moscow pledged to crack down on tax avoidance by multinational companies. The meeting’s final communiqué said members were determined to develop measures to stop firms shifting profits from a home country to pay less tax elsewhere.
A recent survey carried out by the Organisation of Economic Co-operation and Development (OECD) found that multinational firms could exploit gaps between tax rules in the different countries in which they operate. OECD secretary general Angel Gurria said laws had to be changed: “Avoiding double taxation has become a way of having double non-taxation.”
The finance ministers of the UK, France and Germany – George Osborne, Pierre Moscovici and Wolfgang Schaeuble – said international action was needed to crack down on companies which transfer profits from their home country to another in order to pay lower taxes.
A number of companies, including Amazon, Google and Starbucks, have come under the spotlight for their taxation strategies in recent months. The G20 communiqué read: “We are determined to develop measures to address base erosion and profit shifting, take the necessary collective action and look forward to the comprehensive action plan the OECD will present to us in July.”
The OECD action plan, to be laid before the G20 in July, will be formulated with the help of three committees. The UK will chair a committee looking at transfer pricing, Germany will head a panel looking at the ways in which companies have reduced their taxable income and assets while France and the US will jointly consider the problem of identifying the correct tax jurisdiction for business activities, particularly e-commerce.
7 January 2013, the Foundations (Guernsey) Law 2012 was brought into force. The Guernsey Registry announced it would be accepting registration of foundations from 9 January 2013 following confirmation of its fee proposals.
The Guernsey legislation contains a distinction in the status of beneficiaries – “enfranchised beneficiaries” with rights to information and “disenfranchised beneficiaries” without rights to information. Section 31(5)(c) of the Law provides for the promotion and demotion of beneficiaries between these classes. This may be used to distinguish between family members who have taken a genuine and active role in the family business and those who have not.
A Guernsey foundation only requires a guardian where there is a purpose in respect of which there are no beneficiaries, or there are disenfranchised beneficiaries. The Guernsey foundation also does not require a Guernsey fiduciary licence holder to be on the Council. In principle, this removes the need for an outsider having a controlling influence over the company however, where neither a council member nor a guardian are Guernsey licensed fiduciaries, the foundation must appoint a resident agent holding a Guernsey fiduciary licence.
The Guernsey reserved powers are restricted to enabling the founder to amend, revoke, vary and terminate the foundation. As well as being restrictive in terms of activity, the powers are also only available during the founder’s lifetime or, where the founder is an entity, for 50 years.
A foundation must have a registered office in Guernsey, at which all records of the foundation must be kept. As part of the registration process a foundation’s charter must be filed with the registrar but it may only be disclosed in certain circumstances as part of criminal investigations. The only information publicly available is that in “Part A” of the register which includes the name and registered number of the foundation, the name and address of the councillors and the guardian (if any) and the details of the registered office.
The Law permits foundations with legal personality currently established under the law of any place outside Guernsey to apply to the Registrar to be registered as a Guernsey Foundation.
The Guernsey Financial Services Commission issued a consultation on a draft Code of Practice applicable to Foundation Service Providers, requesting comments by 25 January 2013.
24 January 2013, the three UK Crown dependencies have signed double tax treaties that also enable the exchange of tax information between Jersey, Guernsey and the Isle of Man. They were signed in London by representatives of each government.
The agreement between Guernsey and Jersey was a revision of a previous one signed in the 1950s, but it was the first time such agreements had been signed between the Channel Islands and the Isle of Man.
Rob Gray, Guernsey’s director of Income Tax, said: “In view of the ease and frequency of transactions between all of the Crown Dependencies, having effective exchange of information provisions in place will also assist the Income Tax Office in the fight against domestic tax avoidance and evasion.”
8 February 2013, the Trust Law (Amendment) Bill 2013, aimed at modernising trust law in Hong Kong, was gazetted. The proposals, which seek to clarify trustees’ duties and powers and better protect beneficiaries’ interests, follow public consultations in 2009 and 2012, and will now be presented to the Legislative Council.
The major proposals introduce a statutory duty of care on trustees; provide trustees with general powers to appoint agents, nominees and custodians, as well as to insure trust property against risks of loss; allow professional trustees to receive remuneration; provide for a court-free process for the retirement of trustees on beneficiaries’ directions; and impose statutory control on exemption clauses that seek to relieve professional trustees from liabilities.
The bill would also allow settlors to reserve to themselves some limited power; abolish outdated rules against perpetuities and excessive accumulations of income; and relax the market capitalisation and dividend requirements for investment in the equity market.
Secretary for Financial Services & the Treasury, Prof KC Chan, said Hong Kong must modernise its trust laws to enhance its status as an international asset-management centre. “The bill, if passed, will bolster the competitiveness of Hong Kong’s trust services industry and attract settlors to set up trusts in Hong Kong,” he said.
At the end of 2011, Hong Kong’s trust industry held assets estimated at US$335 billion, with more than 60% of the special administrative region’s (SAR) asset management business originating from non-Hong Kong investors.
14 January 2013, Indian Finance Minister Palaniappan Chidambaram announced that the government has accepted the major recommendations set out in the final report of the Expert Committee on implementation of the general anti-avoidance rule (GAAR).
The Finance Minister endorsed the committee recommendations that the “main purpose” test be used to determine whether an arrangement is “impermissible” and that only the impermissible parts of an arrangement (rather than the entire arrangement) should be subject to the GAAR; that the GAAR should not apply to non-residents that invest in foreign institutional investors (FIIs); and that implementation of the GAAR should be deferred – though he agreed to a two-year, rather than a three-year, deferral.
The GAAR, introduced in Finance Act 2012, is designed to target tax haven and holding company structures, as well as other types of tax avoidance strategies. An expert committee under Dr. Parthasarathi Shome was constituted to undertake stakeholder consultations and finalise the guidelines for the GAAR. The Shome Committee submitted its final report on 30 September 2012.
The applicability of the GAAR will be triggered only where the tax benefits under the arrangement concerned exceed a monetary threshold of US$600,000. Investments made before 30 August 2010 – the date the Direct Taxes Code Bill 2010 was introduced – will be grandfathered. The facility to apply for an advance ruling from the Authority for Advance Rulings (AAR) on whether an arrangement is an impermissible avoidance arrangement will be retained and the administration of the AAR will be strengthened.
19 February 2013, the Isle of Man became the first British dependency or territory to sign a FATCA-style Intergovernmental Agreement (IGA) with the UK, which includes automatic tax information exchange and the setting up of a disclosure facility to clamp down on tax evasion.
The US Foreign Account Tax Compliance Act (FATCA) was enacted by US Congress in 2010 to ensure that the US tax authorities obtain information on financial accounts held by US taxpayers with foreign financial institutions (FFIs). The Isle of Man, which is currently negotiating a FATCA IGA with the US, said the UK IGA would be finalised to the same timetable.
Under the UK automatic exchange agreement, a wide range of financial information on UK taxpayers with accounts in the Isle of Man will be reported to the UK revenue (HMRC) automatically each year. It follows closely the UK-US IGA to Improve International Tax Compliance and to Implement FATCA in order to minimise burdens on financial institutions.
The disclosure facility will allow investors with accounts in the Isle of Man to come forward and settle their past affairs before information on their accounts is automatically shared. It will operate from 6 April 2013 and run until September 2016. Liabilities arising from April 1999 must be fully disclosed and there is a guaranteed penalty rate – 10% for returns to be filed before April 2009 and 20% thereafter.
Last November Jersey and Guernsey also had discussions with the UK for IGAs but stated that they did not wish to sign up unless it was a global regulation. However Guernsey subsequently committed to an IGA with the UK, based on the same tax sharing principles as with the US, on 15 March and Jersey followed suit on 20 March. In a statement, Guernsey Finance said the IGA would include alternative reporting arrangements for non-domiciled UK tax residents (non-doms), agreement to negotiate a revised Double Taxation Agreement and agreement on a disclosure facility.
17 January 2012, Dutch Deputy Finance Minister Frans Weekers sent an open letter to the Dutch parliament, which was debating the Netherlands’ business tax policy, stating that the government would not make any unilateral changes to taxation of international companies.
Dutch tax laws, it said, had sufficient safeguards to protect against profit shifting that had no real economic substance and that its extensive tax treaty network prevented the improper use of intermediates, while promoting investment in otherwise unattractive countries.
The letter stated that the possibilities at the disposal of multinational enterprises to enter into tax planning schemes were of an international nature and that the issue should be dealt with at an international level. The Dutch government would develop its tax policy only by international discussions with bodies such as the OECD and the EU.
12 February 2013, the OECD issued a 90-page report entitled “Addressing Base Erosion and Profit Shifting (BEPS)”, which was requested by the G20 countries and various individual governments to help provide solutions.
The OECD study notes that certain multinational companies employ tax planning strategies that result in them paying as little as 5% in corporate taxes when smaller businesses are paying up to 30%. It also found that some small jurisdictions act as conduits, receiving disproportionately large amounts of foreign direct investment (FDI) compared to large industrialised countries and investing disproportionately large amounts in major developed and emerging economies. This has given multinational companies an “unfair competitive advantage”.
The report identifies six key “pressure areas”:
International mismatches in entity and instrument characterisation, including hybrid mismatch arrangements and arbitrage;
The application of treaty concepts to profits derived from the delivery of digital goods and services;
The tax treatment of related party debt-financing, captive insurance, and other intra-group financial transactions;
Transfer pricing, in particular in relation to the shifting of risks and intangibles, the artificial splitting of asset ownership between legal entities within a group, and transactions between such entities that would rarely take place between independent entities;
The effectiveness of anti-avoidance measures, in particular general anti-avoidance rules (GAARs), controlled foreign corporation (CFC) regimes, thin capitalization rules, and rules to prevent tax treaty abuse;
The availability of harmful preferential regimes.
OECD Secretary-General Angel Gurría said: “These strategies, though technically legal, erode the tax base of many countries and threaten the stability of the international tax system … it is critical that all tax payers – private and corporate – pay their fair amount of taxes and trust the international tax system is transparent. This report is an important step towards ensuring that global tax rules are equitable, and responds to the call that the G-20 has made for the OECD to help provide solutions to the global economic crisis.”
The report presages the development of a comprehensive action plan by June 2013, which will identify actions required to address BEPS, set deadlines for those actions and identify the resources and methodology required to implement the proposed solutions.
4 March 2013, a New York District Court ordered Wegelin & Co, the oldest Swiss private bank, to pay nearly US$58 million after it admitted to conspiring to assist US taxpayers hide US$1.2 billion in Swiss bank accounts. The sum comes on top of US$16.3 million in forfeitures already obtained by the US authorities.
Wegelin, which sold off most of its business during the investigation and is now planning to close, pleaded guilty to conspiracy in January. The case marked the first time US authorities had indicted a foreign bank and subsequently obtained a guilty plea for facilitating tax evasion.
US District Judge Jed Rakoff followed prosecutors’ recommendations and imposed a US$22.05 million fine and ordered US$20 million in restitution. He also entered an order finalising $15.82 million in forfeitures, which he had preliminarily approved at the time of the guilty plea.
The US government previously obtained a US$780 million settlement with UBS AG in 2009, and tax probes continue of other Swiss banks including Credit Suisse and Julius Baer. US Federal authorities indicted Wegelin in February 2012 after they said the bank began going after US clients of UBS once the Justice Department’s probe of that bank became public in 2008.
Wegelin “chose to view the investigation of UBS and the resulting exodus of UBS customers as a business opportunity, rather than as an example to be avoided,” said prosecutors. According to the indictment Wegelin had $25 billion in assets at the end of 2010.
14 February 2013, Switzerland signed an Intergovernmental Agreement (IGA) with the US following the decision of the Swiss Federal Council to give the go-ahead the previous day. Initialled on 3 December 2012, the IGA provides for implementing the US Foreign Account Tax Compliance Act (FATCA) and is the first Model 2 IGA to be signed with the US.
As the US will phase in FATCA from 1 January 2014, Swiss financial institutions would have been obliged to implement FATCA from this date – irrespective of an IGA between Switzerland and the US – or risk being excluded from the US capital market. Without an IGA they could not benefit from simplified implementation and would thus be at a disadvantage relative to competitors in other financial centres, said the Swiss Federal Department of Finance.
Unlike the Model 1 IGA, the Swiss Model 2 IGA provides for reporting directly to the IRS, as opposed to reporting to the local country’s tax authority, which will then report to the IRS. Additionally, the Model 2 IGAs do not include reciprocal reporting responsibilities for the US. In the case of grave errors being committed during implementation, the IRS may submit requests for information to the foreign financial institutions (FFIs) concerned, about which it has to inform the Swiss authorities. On-site inspections by the IRS at the FFIs concerned are not permitted.
As noted in the final regulations and adopted in the Swiss Model 2 IGA, FFIs within a Model 2 jurisdiction will be required and directed by the local government to register as participating FFIs with the US, unless exempted or certified deemed-compliant. The rules of the FFI Agreement will generally apply to participating FFIs, unless modified by the rules outlined in the Model 2 IGA. Participating FFIs have the option to either apply the due diligence rules in the final regulations or those contained within Annex I of the Swiss Model 2 IGA, although they must continue to use the same set of rules once elected.
An addition in the Swiss Model 2 IGA is a category in Annex II for Swiss Investment Advisors as a deemed-compliant FFI. This category is for entities that render investment advice to and act on behalf of customers. An investment advisory entity would generally not qualify for a deemed-compliant category in the other signed IGAs to date or in the final regulations.
Switzerland brought the new Tax Administrative Assistance Act, which governs the execution of administrative assistance under double taxation agreements, into force on 1 February 2013. It was approved by parliament on 28 September 2012 and the deadline for calling a referendum expired on 17 January 2013 without a referendum being called.
Switzerland was the fifth country to sign a FATCA agreement with the US, following the UK, Denmark, Mexico and Ireland. The US Department of the Treasury is engaged with more than 50 countries and jurisdictions around the world to implement the information reporting and withholding tax provisions of FATCA.
27 February 2013, the Swiss Federal Council adopted two consultation draft bills to provide for: revised FATF recommendations on combating money laundering and terrorist financing; and extend due diligence requirements to prevent untaxed assets from being accepted by financial intermediaries in Switzerland. Both consultations will run until 15 June 2013.
The key measures in the anti-money laundering bill are to introduce:
A disclosure obligation for holders of bearer and registered shares of unlisted companies in order to enhance the transparency of legal entities, and extension of the due diligence requirement for establishing the identity of beneficial owners. The proposed measures should also meet the requirements of the Global Forum;
A duty to verify identity and risk-based due diligence requirements for politically exposed persons in Switzerland and international organisations;
A new predicate money laundering offence in the form of qualified tax fraud in the area of direct taxation and extension of the existing predicate offence in the area of indirect taxation;
A mandatory requirement for payments above CHF100,000 in respect of purchases of real estate and movables to be processed via a financial intermediary subject to the Anti-Money Laundering Act (AMLA);
The effectiveness of the reporting system is to be increased and the procedures for financial intermediaries will be simplified. The Federal Department of Finance (FDF) was also instructed to submit the necessary legal adjustments regarding the freezing of the assets of terrorists and terrorist organisations to the Federal Council.
The enhanced due diligence requirements bill is to introduce a risk-based assessment to prevent the acceptance of untaxed assets. The most important indicators of increased risk are contained in the law, such as a client’s wish for greater discretion or for investments to be carried out in complex structure without any reasonable justification. The law likewise sets out indicators of when financial intermediaries can assume a reduced risk – if, for example, there is a double tax treaty between the client’s country of domicile and Switzerland. A credibly designed self-declaration can also constitute a strong indicator of tax-compliant behaviour.
The details are to be set out in self-regulation provisions that have to be recognised as a minimum standard by the supervisory authority. As resolved on 14 December 2012, the Federal Council wishes to refrain from introducing a widespread self-declaration obligation.
If the risk-based assessment reveals suspicions of a lack of tax compliance, financial intermediaries will have to refuse to accept assets. Where a change in behaviour by an existing client prompts justified suspicions that the client’s assets are not tax-compliant, the financial intermediary will have to ask the client to provide proof of tax compliance within a reasonable timeframe. If the client is unable to supply proof, the business relationship is ultimately to be terminated.
29 January 2013, UK Treasury minister David Gauke confirmed that Swiss banks had paid the first instalment of CHF500 million (£342m) under the withholding tax agreement with Switzerland that came into force on 1 January. This sum will be reimbursed to the banks in stages from anonymous retrospective taxation payments received from mid-year.
Under the terms of the agreement, all UK taxpayers with a bank account or securities deposit in Switzerland must either pay a new withholding tax of 48% on income, which is deducted directly from their account and transferred anonymously to their country of domicile, or must disclose their account details to the UK revenue.
Swiss banks are required to inform affected clients about the new regulation by the end of February 2013. Clients then have until the end of May to decide whether they choose for withholding tax to be deducted from their account or whether they choose to disclose their account details.
Gauke said: “Our agreement with the Swiss government will deliver around £5 billion of previously unpaid tax to the UK. The first down payment of CHF500 million has now been received. This is money which was owed to the UK and has now been paid.”
18 March 2013, the UK’s Upper Tribunal ruled that a £9.4 million painting fell into the category of “plant and machinery” as defined by the Taxation of Chargeable Gains Act 1992 and no tax was therefore payable on its sale more than 10 years ago.
Omai, Sir Joshua’s Reynolds’ 1776 portrait, was part of the estate of Sir George Howard, who died in 1984. It was sold at Sotheby’s in 2001. His executors argued that, as the painting had been on loan to the estate company of Castle Howard since 1952, it should be viewed as “plant” used in the running the house as a business and thus exempted from capital gains tax.
Mr Justice Morgan accepted their plea that the painting was part of the “functional apparatus” of the company and should therefore, under section 44 of the 1992 Act, be classified as a “wasting asset” that in principle became worthless 50 years after it was placed on public display – even though its value has in fact continued to multiply since then. No tax was therefore payable on the sale.
7 February 2013, a US appeals court dismissed an action brought by three US customers of Swiss bank UBS to recover damages over bank services that led to them evading US taxes. They argued that UBS had failed to tell them to disclose their accounts, which ranged from $500,000 to $2 million, and had therefore violated the obligations it took on by joining the 2001 IRS Qualified Intermediary (QI) programme designed to combat tax evasion by US taxpayers.
In seeking class-action status on behalf of all US customers with similar accounts from 2002 to 2008, the plaintiffs demanded that UBS cover their settlement costs under the US tax amnesty programme (which required them to pay back taxes on balances plus 20% penalties) and pay hundreds of millions of dollars of alleged profit tied to the fraud.
In dismissing their appeal, the 7th US Circuit Court of Appeals in Chicago said UBS’ obligations under the QI programme did not run to the plaintiffs and that UBS had no general duty to prevent them from breaking the law. Circuit Judge Richard Posner said: “The plaintiffs are tax cheats, and it is very odd, to say the least, for tax cheats to seek to recover their penalties … from the source, in this case UBS, of the income concealed from the IRS. This lawsuit, including the appeal, is a travesty.”
A spokesperson for UBS said the bank was pleased with the decision, which showed that “plaintiffs cannot turn to UBS to blame it for their own omissions or failures to disclose offshore accounts and to pay taxes.”
In 2009 UBS admitted to helping several thousand wealthy Americans evade taxes and paid a $780 million fine. Several other banks, including Credit Suisse, remain under scrutiny by the US Department of Justice.