IRS Targets Banks In FATCA Crackdown
The US Internal Revenue Service (IRS) has posted tax investigators to foreign embassies to lead a Foreign Account Tax Compliance Act (FATCA) crackdown on suspected tax evasion.
The Asia Pacific financial centres of Hong and Singapore are two of the main targets, according to industry experts.
The move follows claims by the US Justice Department that HSBC Bank in Hong Kong was at the hub of an international tax avoidance network with offshore wealth managers Sovereign Management and Legal.
The Justice Department alleged Sovereign was directly assisting US taxpayers to evade paying tax.
HSBC USA was ordered to hand over the firm’s bank statements to help identify money laundering banks and the hiding of assets in Hong Kong and Panama.
Tax avoidance claims
The banks involved have not been named and HSBC USA is not accused of any wrongdoing, but acted as a correspondent bank in the US for the Hong Kong institutions.
“Some client details may be handed to the IRS as part of our obligations under FATCA,” said an HSBC spokesman.
Other banks are also in the Justice Departments sights –
Deutsche Bank was accused of co-ordinating a $100 million tax avoidance scheme for US taxpayers
Leumi Bank, Israel, has settled a tax evasion investigation by paying $400 million in compensation to the US government
Travis Benjamin, the head of tax at Hong Kong law firm Deacons said: “It’s not only the American IRS but tax authorities from other countries who are launching investigations and gathering tax data across Asia.”
Boiler room scams
His colleague, Simon Deane, has also explained that banks in Hong Kong handled hundreds of millions of dollars of cash from boiler room share scams based in Thailand and The Philippines.
Between 4,000 and 10,000 European and US investors fell victim to the fraudsters, says Deane.
“The banks in Hong Kong are accused of smurfing,” said Deane. “That’s when the right questions are not asked about the course of large sums of money before the banks open accounts and accept cash from customers.”
One of the alleged masterminds behind the boiler room frauds is a British expat with a personal net worth of more than $150 million. The scammers are also accused of paying huge bribes to government and military officials to turn a blind eye to their activities.
Lobbyists are pressuring the police in Thailand to take action against the scammers and say some signs of the operations winding down are underway as whistle-blowers threaten to name the crooks and corrupt officials.
