December 5, 2023

U.S. Seeks HSBC Customers’ Names as Part of Tax Inquiry

The request, from the civil tax division of the Justice Department, is part of a widening investigation into private offshore services that helped scores of wealthy American clients avoid income taxes. The suit is an indication that federal authorities are broadening their scrutiny to include countries and regions beyond Switzerland, Liechtenstein, Singapore and the Caribbean. India is not usually thought of as a tax haven.

Federal authorities filed a similar request on UBS, the Swiss banking giant, in 2008. The government dropped the lawsuit last August after the Swiss government agreed to turn over the names of 4,450 UBS American clients as part of a broad investigation of the bank’s offshore private banking services. The bank also paid $780 million to settle criminal accusations that it had defrauded the I.R.S. by allowing wealthy Americans to hide billions of dollars in taxes in secret offshore bank accounts.

Pressure on HSBC, one of the world’s largest banks, threatens to expose more layers of Swiss-style banking secrecy, a tradition that began in the Middle Ages and that has spread around the world.

The request, made in court papers filed in the Federal District Court in San Francisco, seeks to force HSBC’s main United States affiliate, HSBC Bank USA, to turn over details of accounts held by wealthy American from 2002 through 2010 through the bank’s affiliate in India, HSBC India. Approval from a federal judge is required before the Internal Revenue Service can issue the summons. HSBC USA operated representative offices for HSBC India under the name N.R.I. Services, in New York and Fremont, Calif., according to court documents. Offshore private banking services were offered to people of Indian origin living outside of India.

Federal authorities said in January that they were considering filing the request, known as a John Doe summons, on HSBC after the indictment of a wealthy Indian-American client of an international bank that was not named but was identified by people briefed on the matter as HSBC.

The client, Vaibhav Dahake, who was born in India and became a naturalized American citizen in 2006, told prosecutors that HSBC had sought out wealthy Indian-Americans for undeclared offshore banking services through N.R.I. Services.

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