EDGE Magazine | Q3 2011 HSBC Bank of Bermuda; on June 28, 2011,6


U.S. taxpayer of Indian descent was indicted for failing to report the existence of his HSBC India account;7


July 4, 2011, another taxpayer pled guilty to concealing ownership of an account held with UBS in 2007.8 5


Investigations - John Doe Summons A John Doe summons is an administrative procedure


through which the DOJ on behalf of the IRS seeks judicial authority to issue a summons. Such a summons is used when the IRS does not know the specific identity of the taxpayer(s), but rather is focused on an ascertainable class of taxpayers. While HSBC and Credit Suisse were previously quick to point out that neither was under investigation, such comments were premature. On April 7, 2011, the Government sought the issuance of a John Doe summons against HSBC USA through which the IRS could obtain the names of the approximately 9000 U.S. persons who held accounts at HSBC India during the years 2002-2010. While the court authorized the issuance of the summons, there was no need to go back to court to enforce the summons, as a resolution appears to have been reached.


The manner in which the US will receive the names of those taxpayers who held accounts with HSBC India is not yet known. However, in early July HSBC began to send letters to US taxpayers with accounts at HSBC India advising them that they had 30 days to close their accounts. Specifically, the letters indicate that the bank is terminating "private banking services to U.S. persons and certain trusts and non-operating companies connected to U.S. persons." On July 17, 2011, USA Today quoting from the letter indicated that HSBC's former head of services for Indians living outside of India, Sanjay Nair, told clients that they should consult with a


5 On January 26, 2011, Vaibhav Dahake was indicted for failing


to report the existence of his HSBC India account. http://www.justice.gov/usao/nj/Press/files/Dahake%20News%2 0Release.html


6 http://www.justice.gov/opa/pr/2011/May/11-tax-642.html 7 http://www.justice.gov/opa/pr/2011/June/11-tax-851.html 8 http://www.justice.gov/usao/nye/pr/2011/2011jul14b.html http://www.usatoday.com/money/industries/banking/2011-07-


9 15-hsbc-alerts-clients_n.htm


another and on


US tax advisor "if you have any concerns about your U.S. tax reporting relating to your HSBC India account(s)." 9 The letter also referenced the 2011 VDP as a method through which such noncompliant account holders could come into compliance.


However, on July 20, 2011, both The Wall Street Journal and Bloomberg reported that the news impacts not just accounts at HSBC India, but all of HSBC Holdings PLC that are outside of the United States.10


article, however, reflects the belief that the news is only limited to those taxpayers with a minimum of $5 million of investable assets.116


On July 15, 2011, Swiss bank Credit Suisse announced that it had received a letter from the DOJ dated July 14, 2011 notifying it that it was the object of an investigation. While it is premature to determine how or when the Credit Suisse matter will be resolved, expect the US to receive names of taxpayers who held accounts at the institution. for several reasons. On the same day, The New York Times reported that a court in Lausanne, Switzerland upheld the Swiss governments decision to force UBS to hand over client information to the US citing "virtually uncontrollable economic repercussions for Switzerland." This news will affect US taxpayers who will initiate litigation in Switzerland seeking to restrict the release of


10


http://online.wsj.com/article/SB10001424052702304567604576 456422610131228.html?mod=WSJ_hp_ LEFTWhatsNewsCollection and Note 18.


11


http://www.bloomberg.com/news/2011-07-20/hsbc-tells-u-s- private-bank-clients-banking-must-be-onsho re-1-.html


12


http://online.wsj.com/article/SB10001424053111903461104576 460451363657660.html


13 The banks involved are rumored to include HSBC, Credit


Suisse, Julius Baer and Basler Kantonalbank. http://www.reuters.com/article/2011/06/28/us-usa-taxes-swiss- idUSTRE75R6MP20110628


14 Daniel Pruzin, "Talks Pursued with US Officials to Resolve


Tax Evasion Concerns with Swiss Banks," 141 DTR I-1, (July 22, 2011).


15 http://www.reuters.com/article/2011/06/09/us-usa-taxes- swiss-idUSTRE7586ZE20110609


The Bloomberg


8


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