US wants HSBC to reveal American tax dodgers in India

The Department of Justice said Thursday it is seeking an order from a San Francisco court to authorise the Internal Revenue Service (IRS) to serve a so-called "John Doe" subpoena on HSBC to obtain information about people whose identities are unknown.

The request follows the indictment of an Indian American businessman Vaibhav Dahake in January by a grand jury in Newark, New Jersey, on charges of conspiracy to defraud the United States by using undeclared accounts in the British Virgin Islands and at HSBC India.

Employees of HSBC Holdings assured Dahake that accounts maintained in India would not be reported to the IRS, prosecutors said.

Dahake is scheduled to appear for a plea-agreement hearing Monday. In court filings, prosecutors said the Dahake case "is not an isolated incident."

HSBC India opened a "representative office" in 2002 at an HSBC USA office in New York City to enable "Non-Resident Indians" (NRIs) living in the United States to open accounts in India, it said.

In 2007, HSBC India allegedly opened a second representative office at an HSBC USA office in Fremont, California, purportedly "to make banking transactions more convenient for the NRI community based in California."

"The Department of Justice is committed to ensuring that all US taxpayers meet their obligations to declare and pay taxes on foreign bank accounts," said John A. DiCicco, principal deputy assistant attorney general for the Justice Department's Tax Division, in a statement.

"The ability to hide accounts in foreign countries is rapidly dwindling. We will continue working hand-in-hand with the IRS to enforce the tax laws against those who are using offshore accounts - wherever they are located - to evade taxes.

IRS Commissioner Douglas Shulman also stated: "The IRS continues to focus its attention on international tax evasion. This summons request is focused on obtaining more information to help us determine if additional actions are needed.

"As I've said all along, our international efforts are not about just one country or one bank, it's about our wider effort to ensure compliance with the nation's tax laws."

In a statement, a spokesperson for HSBC in New York said, "While we haven't seen the summons, HSBC does not condone tax evasion and fully supports the US efforts to promote appropriate payment of taxes by US taxpayers.

"While complying with the law in all the jurisdictions in which it operates, including India, HSBC cooperates with requests from US authorities."

HSBC spokesperson Juanita Gutierrez also said the bank has "been engaged in a constructive dialogue with US authorities," and hopes any IRS summons issues can be resolved quickly.

US law requires US taxpayers to declare their global income and any foreign bank accounts with more than $10,000 during that tax year.

According to court documents, HSBC informed the IRS last September that at least 9,000 US "premier" clients-high-net-worth customers-had deposits with HSBC's Indian bank.
The government said 2009 bank figures showed that US resident premier clients had Indian deposits of nearly $400 million.

US officials said that as of 2009, US taxpayers had only disclosed 1,921 HSBC accounts in India. The IRS is seeking client information on premier accounts as well as standard accounts maintained for less-wealthy customers.