HSBC clients face US criminal probe

THE US has launched a criminal investigation into taxpayers who may have evaded taxes through HSBC accounts in India and Singapore.

The Justice Department probe was revealed by tax attorneys close to the matter.

The agency is looking into whether taxpayers may have violated federal criminal laws by failing to report that they had a financial interest in, or signature-authority over, a financial account located in a foreign country, according to a Justice Department letter obtained by Dow Jones Newswires.

The letter doesn’t mention the bank by name, but the attorney who provided it confirmed that the recipient is an HSBC Holdings offshore-account holder. The DoJ said in the letter that it had “reason to believe” the person had an interest in a foreign account that wasn’t reported to the Internal Revenue Service on either a tax return or a special tax form used to report foreign accounts.

“You are further advised”, the letter concludes, “that you are the subject of a criminal investigation being conducted by the Tax Division”. It is signed by Kevin Downing, a senior litigation counsel at the DoJ.

Robert McKenzie, a partner at Arnstein & Lehr in Chicago, said he has had calls from two prospective clients with HSBC accounts in India.

The DoJ and HSBC declined to comment.

The development didn’t come as a surprise to tax lawyers who have worked closely on the UBS AG tax-evasion case over the past year. The Internal Revenue Service and DoJ conducted a wide-ranging investigation into whether Americans with UBS accounts in Switzerland used the accounts to evade US taxes by not reporting income on the assets in the accounts.

The IRS and DoJ have been saying for months that their efforts to target Americans with undeclared accounts are “not just about UBS”, said Scott Michel, an attorney at Caplin & Drysdale in Washington. Given the information the agency has obtained from about 15,000 voluntary disclosures, potential whistleblowers and informants, it is “utterly unsurprising” that the probe appears to have expanded to another world-wide institution, Mr Michel added.

Bryan Skarlatos, a partner at law firm Kostelanetz & Fink in New York, said he had spoken to several people who were approached by the IRS or DoJ about their accounts at HSBC. These people had HSBC accounts in several countries around the world, he said.