First Atlantic Denies IRS Allegations in Offshore Tax Investigation

First Atlantic Commerce this week issued a strongly worded statement distancing itself from an investigation launched by the U.S. Department of Justice of offshore transactions. First Data Corp. last week said it was reviewing documents Justice filed in federal court seeking information on First Data merchants that sell or provide offshore services, including financial processing (Digital Transactions News, April 17). The request is part of an ongoing investigation of offshore tax evasion. The Internal Revenue Service in court papers says First Data actively marketed and sold offshore services to U.S merchants, which in turn used the services to help clients hide taxable income, according to press accounts. The focus of the IRS request is a First Data unit formerly known as Cardservice International, now called First Data Independent Sales, these accounts say. The court papers say Cardservice began marketing offshore processing services in 2002 with First Atlantic Commerce, a Bermuda-based provider of transaction-gateway and risk-management services for merchants. But in its statement, which it says corrects “certain erroneous references” by the IRS, First Atlantic says, “[First Atlantic Commerce] has no responsibility whatsoever with respect to the materials distributed to the Cardservice independent sales agents…in relation to the marketing of offshore services to [U.S] merchants either in print form or via the online Web site, contrary to what the IRS declaration states.” The company says its relationship with Cardservice ended in 2005. The statement goes on to say that First Atlantic “does not and has not knowingly” processed credit card transactions for U.S. merchants through First Data for settlement to offshore merchant or bank accounts. It also denies the company has had any relationship “of any consequence” with “entities alleged by the IRS to be tax shelter promoters.” The references to First Atlantic by the IRS in the court papers, the company says, “are based upon inaccurate information apparently gleaned and misconstrued from articles, marketing collateral, and the Internet.” The company says it has not been contacted by the IRS but will cooperate fully with any authorities if contacted by them. Last week, a First Data spokesperson said that the processor “has an excellent track record of cooperating with all government agencies and will continue our practice of complying with all lawful requests for information with due regard for the confidentiality of our customers' data.” A statement from the processor noted that the Justice Department in the past has served similar summons on the major payments companies as well as more than 100 merchants, including MasterCard Inc., Visa Inc., eBay Inc.'s PayPal payment service, and others. “It is our understanding that the Internal Revenue Service is seeking information from First Data only in its capacity as a holder of third parties' records. First Data does not approve or support any practice whose purpose is unlawful tax avoidance,” the spokesperson said.