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 too late."
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