Department of Justice is conducting an active HSBC India Investigation

Among the changes announced by the IRS to the Offshore Voluntary Disclosure Program on June 18, 2014, there was an increased 50% penalty (on account value) for taxpayers with accounts at specified financial institutions. 


These institutions have been cooperating in IRS/Department of Justice criminal investigations relating to offshore accounts of U.S. persons. If you review the financial institutions on this list (http://www.irs.gov/Businesses/International-Businesses/Foreign-Financial-Institutions-or-Facilitators), you will see a lot of what you expect to see: banks and financial institutions that are located in countries that are historically tax havens. But, you will see one that stands out like a sore thumb: The Hong Kong and Shanghai Banking Corporation Limited in India (HSBC India). This has prompted the DOJ to conduct an HSBC India investigation.


HSBC India Investigation: Why?

When thinking of places to hide money from the U.S. Government, India wouldn't be the first place most of us would think of. However, back in 2011, the IRS prosecuted a man of Indian origin who had, according to the court filings, been engaged in tax evasion through use of his HSBC India accounts (among other foreign accounts).


Filings in that proceeding led the IRS to look more closely at HSBC India and issue a series of "John Doe" Summonses to the bank seeking information about U.S. taxpayers who have accounts with this bank. Because of this, if you have accounts at HSBC India, even if you opened those accounts totally innocently, the Department of Justice may already be looking into your accounts as part of its HSBC India investigation.


If you have accounts with HSBC India, it is very important that you seek to get into full compliance with your U.S. tax obligations. The first step in doing this is filing a PreClearance Request with the IRS. Perhaps your PreClearance Request will be approved and you will have confirmation that the DOJ has not already received information on your accounts and you can feel relieved that you acted in time.


If the Department of Justice already has an HSBC India investigation into your accounts, a Prosecutor or other DOJ representative will contact you after you file your PreClearance Request and will provide you with options on how you can proceed. Perhaps your case is one where they will allow you to enter the OVDP even though they already have information about your accounts. Perhaps their case has already gone too far and you will require negotiations to resolve the matter (hopefully without criminal charges) directly with the DOJ or Revenue Agents working with the DOJ.


No matter how that request turns out, it is better that you or your representative make first contact the IRS rather than being surprised with a phone call, letter or in person visit from a DOJ Prosecutor.