The IRS has filed a "John Doe" summons on HSBC demanding the names of foreign bank account holders who may have committed tax fraud, or failed to file foreign bank account reports TDF 90-22. 1 (FBAR). The federal district court has granted the IRS request. Specifically the IRS is demanding the names of all U.S. taxpayers who at any time from 2002 through 2010 held signatory authority over, or an interest in accounts maintained at HSBC in India. The IRS alleges that there were over 7,500 of HSBC in India who failed to file an FBAR with the IRS, and who also failed to report their income from these accounts.
The John Doe summons is similar to the one filed on Swiss banking giant UBS, AG in 2008 which ultimately resulted in the turnover of the names of about 4,550 Swiss bank account owners, and which continues to provide the IRS with a continuing stream of criminal tax fraud prosecutions.
Our tax lawyers don't expect that the IRS will have much difficulty getting its summons enforced. Indeed HSBC has already been quoted to the effect that "while we haven't seen the summons, HSBC does not condone tax evasion and fully supports the U.S. efforts to promote appropriate payment of taxes by U.S. taxpayers."
As previously discussed here, the willful failure to file an FBAR is a criminal tax offense, and also subjects the owner of the offshore account to civil penalties which can exceed 6 times the balance in the foreign bank account.
The IRS is currently conduction a partial tax amnesty known as the Offshore Voluntary Compliance Initiative (OVDI) which can insulate against tax evasion and criminal FBAR charges as well as lowering the civil penalties.