What is Offshore Portfolio Investment Strategy (OPIS)?

The history of the Offshore Portfolio investment strategy dates back to 1997 when some of the Accounting firms started to create fake losses in the accounting books in order to avoid Taxes. This happened during the time when fraudulent tax activities had become popular across certain nations and financial industries.

It was created to deceive the IRS (Internal Revenue Service). In fact, the losses that were showed on the accounting books seemed to be a lot larger than the actual financial losses. As a result, the government of the United States ended up losing around $85 billion. The OPIS became the tax prevention program produced and launched by KPMG.

Breaking down the OPIS Products

These financial losses are designed to Offset the profits the company earns from Capital gains. This makes it easier for the creators to pay less tax. Some of these tax shelters claimed to be the legal tax formation techniques. However, the Internal Revenue Service started to perform audits on these financial companies to detect unlawful activities.

In 2001, the offshore portfolio investment strategy was declared to be illegal. The only purpose of these organizations was to lower the taxes. Later, IRS got access to the email messages that proved that the KPMG had launched another similar product and was selling it on the Market. The authorities and regulatory bodies started to conduct investigation a year later. Surprisingly, these unlawful tax shelters had proliferated by that time.

KPMG Paid $456 Million Fine

A 2003 report confirmed that many international financial institutions and the accounting companies were marketing the offshore portfolio investment strategy. These unlawful tax shelters were embraced by many banks and accounting firms. As mentioned before, many copies of the banned OPIS products were formed by the end of 2002. Not only did the IRS caught KPMG for promoting the tax prevention accounting strategy, but it also detected the unlawful activities promoted by Deutsche Bank as well as Wachovia Bank. The banks were not directly associated with this Tax Fraud, but they had played a significant role in organizing the transactions. The KPMG had requested the loan from these banks to complete the financial transactions.

While some reputable organizations were found not guilty, the Internal Revenue Service caught KPMG, which happened to be the leading organization that promoted these unlawful abusive taxation services. They also admitted to being guilty of all the accusations. They paid around $456 million as the penalty for conducting illegal taxation activities. However, KPMG did not face indictment as if the company was declared bankrupt, only three major accounting firms would be there for handling the audits for large-scale firms. IRS did not put this organization out of business. KPMG had to promise that they will not engage in any form of illegal Tax Shelter activities. However, the clients that took the services of these tax shelters ended up paying a considerable amount of tax as well as penalties to the IRS.