HSBC is New Target of DOJ Investigation into International Banks and Tax Evasion

Jul 28, 2010   

The next bank to draw the attention of the Internal Revenue Service (IRS) after the UBS investigation, on which we previously reported, is London-based HSBC. 

The Department of Justice (DOJ) has begun a criminal investigation of U.S. taxpayers using HSBC Holdings PLC accounts in India and Singapore to evade domestic taxes.  The DOJ is investigating whether the taxpayers have violated federal law by failing to report financial interests in accounts held in foreign countries.

Over the past two months, at least 15 or more HSBC clients have received correspondence from the U.S. government indicating that they will be investigated for tax evasion.  Two HSBC customers will be in front of a federal court in Fort Lauderdale on tax evasions charges on September 7.

It has been estimated that there is approximately $700 billion in untaxed wealth in Asia where HSBC maintains a prominent presence.  HSBC was founded in Hong Kong in 1865.  The Internal Revenue Service (IRS) will be placing 800 new agents overseas to strengthen its international operations due to President Obamas goal to crack down on tax evasion.  Many of those agents will be heading to Asia.

HSBC is cooperating with authorities, unlike UBS which initially refused to release the names of its U.S. customers to authorities.  HSBC has already turned over names and customer service audio tapes to U.S. officials.

The IRS and DOJ have been investigating U.S. taxpayers using accounts with UBS in Switzerland to evade taxes by not reporting income on the assets in the accounts.  (See IRS announcement here and DOJ announcement here.)  UBS was recently hit with $780 million fine for hiding U.S. taxpayer assets.  It appears as if the IRS and DOJ interest in international banks will continue to spread and that the agencies will continue to take on tax evaders internationally.

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