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U.S. Officials Granted Access to Bank Records in Tax Evasion Probe
Author: Scarinci Hollenbeck, LLC
Date: November 22, 2013
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A federal judge granted a request made by government officials to obtain the account data and identifying information of American banking clients suspected of committing tax law violations through offshore accounts managed by the Bank of N.T. Butterfield & Son.
Butterfield currently has several offices throughout the Caribbean and Switzerland, and officials have long suspected that certain American account holders have utilized their accounts to hide income and assets from the Internal Revenue Service. The special summonses granted by U.S. District Judge Richard Berman will require five U.S. banks – Citigroup, Bank of New York Mellon, JPMorgan Chase, HSBC, and Bank of America – to provide financial information and details to federal officials about clients who may be evading their tax responsibilities through Butterfield.
As Butterfield does not operate within the U.S., tax officials will be required to obtain information through the five banks that manage correspondent accounts with the Caribbean-based financial institution. These correspondent accounts, which are common in the international banking system, enable foreign banks with no U.S. presence to work with U.S. institutions to carry out monetary transactions and perform services for their clients. Lately, however, officials have discovered that these accounts may also be abused and allow clients to shield income.
These so-called “John Doe” summonses have been a strategic tool in the U.S. Justice Department’s search for Americans who are using offshore accounts to skirt their tax responsibilities. The summons was instrumental in a 2009 case against Swiss banking giant UBS, which eventually resulted in the institution agreeing to pay a $780 million settlement to avoid criminal prosecution for helping Americans evade their taxes.
“These John Doe summonses will provide information about individuals using financial institutions from Switzerland to the Cayman Islands to Hong Kong to avoid their U.S. tax obligations,” said Assistant U.S. Attorney General Kathryn Keneally.
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