US tax probe moves focus to Asia in offshore bank crackdown

News - Tax

Written by Ray Clancy

Tuesday, 11 May 2010 12:00

US authorities are set to investigate thousands of affluent tax evaders using offshore bank accounts, according to legal experts.

It is already looking at potential evasion among customers of UBS in a global high profile case but investigations will not end there, said Kevin Downing, a senior tax attorney with the US Department of Justice.

He told a conference in Singapore that somewhere between 4,000 and 7,000 cases are likely to be examined as it seeks co-operation from banks all over the world.

Some private banking clients are choosing to take cash from Swiss accounts and carry it by hand back to the United States, to avoid an electronic trail, only to be caught by US law enforcement officers and penalised for tax evasion and illegal smuggling of money into the country, Downing said.

‘When they go in and close their accounts, they are picking up brand new $100 bills that are coming in in $100,000 shrink wrapped bundles. Guess what? We can trace that money,’ he said, adding such cash would be forfeited.

His team is currently making its presence felt in a number of Asian locations including Hong Kong, Beijing and Shanghai. It is meeting with officials in finance and tax regulatory organisations and bankers to discuss cross border tax prosecutions.

He said that since the start of the US crackdown on tax evasion, money has moved from the Caribbean to Switzerland and Asia.

UBS agreed last year to pay $780 million and hand over 4,450 client names to settle charges after it admitted helping US clients evade tax law.

It is part of a worldwide trend to combat tax evasion. Germany has said it is prepared to pay for data offered by whistleblowers on clients of Swiss banks who may have been evading taxes, while France said it had obtained sensitive data belonging to potential tax evaders, some of which belonged to the Swiss private banking operations of HSBC.

Downing declined to say whether the Justice Department was investigating any other foreign banks and said he hoped the US authorities would not have to conduct UBS style probes.

About 15,000 Americans with offshore accounts came clean under an amnesty programme last year, giving them reduced penalties and a chance to avoid criminal prosecution while giving authorities a trove of information to assist their hunt.

‘We now have the ability to go back through with voluntary disclosures and really target the banks with witnesses and evidence. These US clients who maintain these offshore bank accounts, they keep their e-mails, they want to have a record. They are coming back to us,’ Downing explained.