In an interesting tax fraud case, Stephen T. Mellinger III, a financial adviser, insurance salesman, and securities broker, has pleaded guilty to "orchestrating a nearly decade-long scheme to promote an illegal tax shelter and commit wire fraud."

The term "tax shelter" was coined decades ago to mean a scheme or device intended to protect, legally, income against taxes i.e. a tax avoidance scheme. However, around the world, governments have created "anti-avoidance" measures by which a scheme that is created for the sole or primary purpose of avoiding taxes will be declared, retrospectively, illegal. 

But some schemes are illegal from inception. The Mellinger case is one of those. "Beginning in late 2013, Mellinger conspired with others to promote an illegal tax shelter whereby clients would claim false tax deductions for so-called “royalty payments” to fraudulently reduce their taxes," said the US Department of Justice. 

I first explained the money laundering risks of royalty payments in "How not to be a money launderer" in 1996 as part of explaining the use of transfer pricing for tax evasion and money laundering. That topic is revisited in my soon-to-be released book "Trade-Based Financial Crime" Vol 2 in relation to a tax case where the US Treasury decided that a company had avoided tax of USD9,000 million.