The US has been stretching its tentacles to uncover even non-Swiss offshore accounts. According to a Justice Department press release dated Nov 17, the federal grand jury had just indicted Desai of San Jose for failing to file two appropriate tax returns and Reports of Foreign Banks and Financial Accounts (FBFA) for his holdings in HSBC India and UAE.
Probes of eight offshore banks issued by the Justice Department in its Offshore Compliance Initiative stages the pursuit of offshore private accounts. This league of banks including Credit Suisse (along with seven offshore banks) have been targeted for allegedly helping Americans evade tax, after Swiss banks had reached a settlement with US authorities over offshore banking services. In July Credit Suisse received a target letter from the Justice Department and thereafter earlier this month prompted its own Clariden Leu to send certain US clients letters informing that their names and account details (dating back to 2002) will be disclosed to the Internal Revenue Services (IRS). Though offshore banks may not have significant presence in the US, authorities try to interpret them to having “US presence”, as long as an access point such as a representative office or a phone number is present.
Still recalled by many fresh and green, the UBS was charged with a fine of 780 million in 2009 to avert indictment charges that it sold banking services which enable Americans to evade tax. The UBS later turned over some 4000 client names to US authorities. As a most recent reminder, Robert E Greeley, resident of San Francisco, was charged for evading tax of interest income of his two offshore accounts, through the help of a UBS Swiss banker. For the present UBS in particular, regulatory forces happen to squeeze them on two fronts – private banking and trader loss. The investigation this time reminds us once again about the eagerness of US authorities to trace the whereabouts of offshore assets.
As of now, industry professionals have noted the complexity of US regulatory measures. An offshore business thought to have little relation to US rules may be subject to regulatory oversight by multiple agencies (SEC, CFTC, FINRA, Dept of Justice, etc). Fund managers should alert investors especially on the US tax and asset reporting issues, even though they may not have expertise in the area. That way funds can reduce compliance risks exposed and costs which may be entailed, such as the loss of a core client base.
Reuters Nov 9 report on Clariden Leu, Credit Suisse can be accessed here.
Department of Justice Nov 17 release on non-Swiss holdings can be accessed here.
The Reuters Sept 20 report on eight offshore banks can be accessed here.
Robert E Greeley’s case settlement can be accessed here.