News & Events

The IRS and the Department of Justice have been on a long campaign of trying to get banks to turn over information on U.S. accountholders. A program called the Swiss Bank Program divided financial institutions into four different categories, with Category 3 and 4 banks in compliance with U.S. tax laws and Category 1 and 2 banks suspected of aiding U.S. citizens in evading tax obligations.

Category 1 banks, already under investigation, couldn't make non-prosecution agreements but Category 2 banks could if they paid fines and agreed to turn over account details.

The IRS has obtained many account details from Category 2 banks. Now, however, a redacted letter sent by HSBC to some of its private banking clients indicates that the agency is trying to get details from Category 1 banks. HSBC is a category 1 bank and isn't eligible for amnesty under the Swiss Bank Program, but it was offered a similar type of settlement deal in 2011.

HSBC, which a federal judge ordered to produce accountholder information in a 2013 ruling, is now being asked to provide specific personal and financial details about owners of accounts held in its private bank in Geneva. The fact the IRS is now asking for this information from a Category 1 bank could indicate it is moving beyond pursuing accountholder details from banks in Category 2.

As the IRS expands the scope of its efforts to find details on offshore accountholders, everyone with undeclared funds in a foreign account should be very nervous. A New Jersey criminal tax lawyer can provide advice on what options you have if you are worried that your bank is about to tell the government you've been evading taxes with offshore accounts.

HSBC Asked to Provide Accountholder Details

The redacted letter sent by HSBC was likely sent as part of a group request which the U.S. made on April 11 for information on HSBC Private Bank customers. Changes to the law in Switzerland in 2014 made it possible for banks to refrain from providing advance notice to accountholders under certain circumstances when turning over accountholder data to the government.

While no longer required to provide advance notice, however, HSBC has clearly been offering this notice to at least some of their banking clients whose information the IRS is seeking.

Those who have offshore accounts are likely to find that HSBC will cooperate fully and give the government what it is asking for. HSBC stated in its letter that it was reiterating a prior recommendation for clients to become “fully tax compliant” with U.S. authorities. 

Those who are concerned HSBC or other banks are going to turn over details to the IRS should talk with attorney Kevin Thorn about whether making a voluntary disclosure before coming under investigation is the best approach to take. There is an ever-increasing likelihood that most or all foreign banks will begin to give the IRS what it is asking for, so time is of the essence for anyone who wants to explore all alternatives for minimizing consequences of alleged tax evasion.