Hong Kong has found itself in the spotlight as a popular haven for offshore tax evasion schemes originating in the U.S., reports the South China Morning Post.
 
Shell companies and bank accounts set up in Hong Kong were implicated in nine of sixteen publicized tax evasion cases brought against American clients of financial services firm UBS.

Accounts involving other countries include Panama, Singapore, the Cayman Islands, the British Virgin Islands, Mexico and Liechtenstein, but entities in Hong Kong formed the majority of the cases.

"We found out that UBS bankers and Swiss lawyers were recommending to the US clients to open up Hong Kong corporations and Hong Kong bank accounts,” said Kevin Downing, a US government lawyer prosecuting the UBS cases, at a University of Hong Kong forum on Friday, “as almost a second curtain of secrecy to conceal the accounts and offshore assets from the Internal Revenue Service."

Previously, many companies were formed in the Caribbean. "In the course of investigation against UBS, we found out a lot of the Caribbean money made its way into Switzerland, made its way into Hong Kong,” added Downing.

Last February, UBS paid US$780 million in a settlement on charges of helping American clients dodge taxes. UBS also agreed to provide detailed account information of nearly 4,450 UBS clients to US prosecutors, but the supplying of that information has been held up in litigation in Switzerland, reports the Post.

Hong Kong is at risk for illicit activities, due to the convenience of and low cost of forming corporations, says the Financial Action Task Force, an intergovernmental agency charged with combating money laundering and terrorist financing in various countries.