US expands investigations against offshore tax evasion

The United States has expanded its action against tax cheaters to countries like India, Israel and Liechtenstein, a top US official told lawmakers on Wednesday.

So far, the US action had been primarily focused against tax cheaters on Switzerland.

"While the (Justice) Department's initial efforts and this hearing have focused on Switzerland, we have expanded our investigations to go after tax cheats and the banks assisting them in India, Israel, Liechtenstein, Luxembourg, and several Caribbean countries," the Deputy Attorney General, James M Cole, told a Congressional committee on Wednesday.

Since 2009, the Department has publicly charged 73 account holders and 35 professionals with violations arising from their offshore banking activities, and 72 individuals have plead guilty or were convicted at trial, he said.

"Just as importantly our enforcement efforts have driven over 43,000 taxpayers with secret offshore accounts to identify themselves to the IRS disclose their offshore accounts, and to pay a total of over $6 billion in back taxes, penalties and interest.

And that number is growing," he said.

Cole said in 2013, the Department obtained four separate orders authorising the Internal Revenue Service to issue John Doe summonses seeking records from banks in the United States for the US correspondent accounts of banks located

in the Caribbean, Switzerland, and other European countries and America has successfully compelled account holders to provide the US with their personal records of their foreign banking activities.

Since the UBS deferred prosecution agreement in February 2009, the Department has taken public action against two other banks, he said, adding that in January 2013, Wegelin Bank, one of the oldest financial institutions in Switzerland, pled guilty to conspiracy to defraud the United States and was ordered to pay substantial fines and to forfeit funds.

"As a result of its criminal conviction, Wegelin was forced to close its doors, which sent a shockwave through the community of banks and bankers in Switzerland that had been engaged in facilitating US tax evasion.

“In July 2013, Liechtensteinische Landesbank AG entered into a non-prosecution agreement, and paid substantial fines," he said.

"What is particularly notable about this case, is that we were able to . . . have Liechtenstein actually change its bank secrecy laws retroactively. “This enabled the Department to obtain files relating to non-compliant US account holders," he said.

"In August 2013, the Department publicly stated that fourteen banks have been authorised for investigation concerning the use of Swiss bank accounts. “This is in addition to on-going investigations concerning cross-border activities by banks in India, Israel, Liechtenstein, Luxembourg, and several Caribbean countries," Cole added.