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 England”.

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.




US Department of Justice press release



Bloomberg (2)

Dow Jones

The Hindu

Irish Independent

Times of India





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