US tax authorities go after HSBC India
11 April 2011
The US Department of Justice is seeking a
court order to force HSBC Bank to disclose all American-owned bank
accounts at its Indian subsidiary.
The records, it says, would be used to
identify US residents who have not declared their overseas assets
to the Internal Revenue Service.
The DoJ made the application in a Californian
court against HSBC Bank USA. It wants a so-called "John Doe
summons" against the bank, meaning that the IRS does not know the
names of the people it suspects of tax evasion. It is similar to
the summons obtained in the UBS affair.
The disclosure order is closely linked to the
recent prosecution of a New Jersey Indian-American businessman
called Vaibhav Dahake.
In January the IRS charged Dahake with
using offshore bank accounts in India and the British Virgin
Islands to evade US tax between 2001 and 2010. That indictment
alleged Dahake was abetted by five unidentified bankers at "one of
the largest international banks in the world, headquartered in
The bank was not explicitly named at the time
but IRS staff unofficially leaked the name as HSBC acting through
its US division NRI Services. (NRI apparently stands for
Non-Resident Indians –
see STEP story of 27 January 2011).
According to Bloomberg, Dahake is expected to
plead guilty at a hearing this week.
HSBC India closed its NRI offices in
California in June 2010, but the DoJ believes NRI clients in the
USA can still access their accounts at HSBC India. The department
says it has been told that NRI representatives in the USA assured
their clients that they could invest in accounts at HSBC India
without paying US income tax on the earned interest, and that HSBC
would not disclose this income to the IRS.
Department of Justice press release
Times of India