The US Government's recent crackdown on offshore tax evasion
shows no sign of slowing down and appears to be expanding to
include new jurisdictions. On November 12, 2013, US District Judge
Richard Berman of the Southern District of New York issued an order
authorizing the IRS to issue "John Doe" summonses
requiring the Bank of New York (Mellon), Citibank, JPMorgan Chase
Bank NA, HSBC Bank USA NA and Bank of America to produce
information about US taxpayers with undisclosed accounts at The
Bank of N.T. Butterfield & Son Limited and its affiliates in
the Bahamas, Barbados, Cayman Islands, Guernsey, Hong Kong, Malta,
Switzerland and the United Kingdom. Previously, on November 7,
2013, US District Court Judge Kimba Wood of the Southern District
of New York entered an order authorizing the IRS to issue John Doe
summonses to the Bank of New York (Mellon) and Citibank to produce
information about US taxpayers who may be evading federal taxes by
holding interests in undisclosed accounts at Zurcher Kantonalbank
("ZKB") and its affiliates. Generally, the IRS will issue
a John Doe summons to obtain information about possible tax fraud
by individuals whose identities are unknown.
The IRS has successfully used the John Doe summons to obtain the
identities of US taxpayers who maintained offshore bank accounts.
In 2009, the IRS sent similar John Doe summonses seeking the
identities of US taxpayers who tried to hide funds at UBS in
Switzerland, and in 2011, the IRS received court approval to serve
a John Doe summons seeking the identities of US taxpayers
maintaining undisclosed bank accounts at HSBC in India. More
recently, in April 2013, a federal judge in San Francisco
authorized the IRS to serve a John Doe summons seeking the
identities of US taxpayers who maintained bank accounts at the
Canadian Imperial Bank of Commerce.
The issuance of the John Doe summonses demonstrates that foreign
bank accounts used for tax evasion remain a significant priority of
the IRS and the Tax Division of the Department of Justice. It is
reported that the IRS learned that US taxpayers may be hiding funds
at these banks based on information submitted by taxpayers
participating in the IRS offshore voluntary disclosure program
("OVDP"), where US taxpayers have disclosed dozens of
accounts at Butterfield and hundreds of accounts at ZKB. The IRS is
aggressively mining the data received in the tens of thousands of
OVDP submissions made by taxpayers.
In December 2012, three employees of ZKB were indicted for
conspiring with US taxpayers to hide income earned on ZKB accounts.
Most recently the US has focused primarily on accounts held by
Swiss banks, but the latest John Doe summonses demonstrate that the
US is intent on aggressively pursuing undisclosed bank accounts in
other foreign countries. In its press release announcing approval
of the John Doe summonses, the Justice Department reminded
taxpayers that the IRS continues to offer an offshore voluntary
disclosure program for taxpayers with unreported foreign bank
accounts and related unreported income. Kathryn Keneally, Assistant
Attorney General for the Justice Department's Tax Division,
stated that "[t]hese John Doe summonses will provide
information about individuals using financial institutions from
Switzerland to the Cayman Islands to Hong Kong to avoid their US
tax obligations. US taxpayers still holding accounts who have not
come clean should come forward and do the right thing before it is
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The election of President Donald J. Trump, combined with Republican control of Congress, makes fundamental U.S. federal income tax reform more likely than at any time since the enactment of the Tax Reform Act of 1986.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).