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IRS Sends Treaty Request to HSBC

Posted in Offshore Account Update, UBS / HSBC on June 29, 2016 | Share

The Internal Revenue Service (IRS) and the U.S. Department of Justice have been going after Swiss banks for years for allegedly facilitating tax evasion among U.S. residents. The Swiss Bank Program was created in order to encourage banks to come forward, pay a fine and report account information voluntarily to the IRS. Banks that came forward could avoid criminal prosecution.

Four different categories of banks were created by the Swiss Bank program, with Category 1 banks already under investigation and not allowed to make amnesty deals and Category 2 banks eligible to enter into non-prosecution agreements. Category 3 and 4 banks weren't in violation of U.S. tax laws.

The IRS has long been sending out requests for information from Category 2 banks to get details on accountholders. Now, however, a request has been sent to HSBC, which is a category 1 bank.

Despite being in Category 1, HSBC and 11 other banks were offered deals similar to non-prosecution agreements back in 2011, and a 2013 ruling by a federal judge authorized the IRS to order HSBC to turn over info about taxpayers who might be evading tax obligations. This means HSBC cooperation is likely.

It is bad news whenever a new bank is asked to provide details on customer accounts and worse news for accountholders when the bank cooperates, as virtually all do. The information provided by banks to the IRS can be used by taxing authorities to go after individual investors.

As a result of the risk of IRS action, anyone who was a private banking customer at HSBC or who otherwise has undeclared money offshore should strongly consider getting legal help as soon as possible from a Washington DC criminal tax lawyer.

IRS Requesting Info on HSBC Private Bank Customers

In 2014, Switzerland passed a law eliminating a requirement mandating advance notice be provided to U.S. residents who had Swiss bank accounts before the bank turned over their financial information. 

Instead of advance notice, accountholders can be notified after their account details are given to the U.S. government. This delayed notification is permitted if advance notice would defeat the purpose of the request made by taxing authorities and/or would thwart the investigation into tax offenses.

While advance notice is not necessarily required any more under Swiss banking laws, a redacted letter sent by HSBC to a private banking customer indicates that at least some accountholders are still being notified when the IRS has started looking into their offshore investments. The redacted letter that came from HSBC's Geneva based private bank alerted an accountholder that the IRS has asked for the client's banking information.

The redacted letter should send off red flags to offshore accountholders that Category 1 banks are now being asked to provide details to taxing authorities. This could mean the IRS has moved on from working with Category 2 banks to try to target accountholders at banks under investigation by the IRS already.

HSBC urged accountholders to resolve tax issues in its redacted letter. With more and more banks turning over accountholder information, this is important advice to heed. Kevin Thorn, a DC criminal tax lawyer can help, so contact an attorney as soon as possible if you're concerned your bank will provide information about offshore funds.


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"Mr. Thorn and the attorneys at Thorn Law Group were so knowledgeable about the IRS Voluntary Disclosure Program and about the way the IRS Criminal Investigation Division works. Mr. Thorn helped put my mind at ease and walked me through the whole Voluntary Disclosure process. With the help of Thorn Law Group, and Mr. Thorn specifically, we were able to get back into compliance and were able to avoid criminal prosecution."