US probes offshore bank accounts

United States district court in New York has authorized the Internal Revenue Service (IRS) to issue summonses for U.S. taxpayers records with Offshore Bank accounts in the Caribbean.

The U.S. Justice Department said on Nov. 12 that U.S. District Judge Richard M. Berman of the Southern District of New York has authorized the IRS to issue summonses requiring Mellon, Citibank, JPMorgan Chase Bank NA (JPMorgan), HSBC Bank USA NA (HSBC), and Bank of America NA (Bank of America) to “produce information about U.S. taxpayers who may be evading or have evaded US federal taxes by holding interests in undisclosed accounts.”

The Justice Department said these accounts are at The Bank of N.T. Butterfield & Son Limited and its affiliates (collectively, Butterfield) in the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland, and the United Kingdom.

“In these actions, the Court granted the IRS permission to serve what are known as ‘John Doe’ summonses on Mellon, Citibank, JPMorgan, HSBC, and Bank of America,” the statement said.

It said the IRS uses “John Doe” summonses to obtain information about possible tax fraud by individuals whose identities are unknown.

The Justice Department said the “John Doe” summonses direct these five banks to produce records identifying US taxpayers with accounts at Butterfield and their affiliates, including other Caribbean banks that use Butterfield’s U.S. correspondent accounts at Mellon, Citibank, JPMorgan, HSBC, and Bank of America to service U.S. clients.

“These cases once again demonstrate the department’s resolve to uncover and identify taxpayers who tried to hide money overseas as a way to avoid federal taxes,” said Assistant Attorney General Kathryn Keneally.

“These ‘John Doe’ summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations,” she added.

“U.S. taxpayers still holding accounts who have not come clean should come forward and do the right thing before it’s too late,” she continued.

U.S. Attorney for the Southern District of New York Preet Bharara said the latest action “shows that the use of foreign banks for tax evasion remains a high investigative priority of this office,” adding that U.S. citizens “should understand that loud and clear.

“By issuing these ‘John Doe’ summonses, we continue our joint efforts with the IRS to identify and hold accountable those who try to evade their legal responsibility to pay taxes,” he said.

Acting Commissioner of the Internal Revenue Service (IRS) Danny Werfel said “international issues remain a major focus for the IRS.”

He said his agency is continuing efforts to “fight tax evaders who use offshore accounts to skirt the law.

“These John Doe summonses for correspondent account records show our determination to pursue evaders using offshore accounts, even if the person hiding money overseas chooses a bank that has no offices on U.S. soil,” Werfel said.

The Justice Department said the IRS Offshore Voluntary Disclosure programs and initiatives enable U.S. taxpayers to resolve their tax liabilities and minimize their chances of criminal prosecution by voluntarily disclosing previously undisclosed foreign accounts and income.

To date, it said U.S. taxpayers have identified 371 previously undisclosed accounts at ZKB and 81 such accounts at Butterfield.

In addition, the Justice Department said a number of U.S. taxpayers with beneficial ownership and control over funds held in accounts Butterfield have admitted failing to report income earned from their offshore accounts on their federal tax returns.

It said the IRS “has reason to believe” that other U.S. taxpayers who held or presently hold similar accounts at Butterfield and their affiliates “have done the same in violation of federal tax law.”

The Justice Department said federal tax law requires U.S. taxpayers to pay taxes on all income earned worldwide.

It said U.S. taxpayers must also report foreign financial accounts if the total value of the accounts exceeds US$10,000 at any time during the calendar year.

“Willful failure to report a foreign account can result in a fine of up to 50 percent of the amount in the account at the time of the violation,” the statement said.

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