Wednesday, February 2, 2011

Another Indictment with Allegations Reputedly of Activity by HSBC and Its Bankers

The Government has obtained another indictment of one Vaibav Dahake, a U.S. depositor in an offshore financial institution. The indictment is a for a single conspiracy count.  The indictment contains the standard allegations -- a U.S. depositor, a tax haven (BVI) entity with bearer shares to hide the activity, an "international bank" (reputed to be HSBC) and a U.S. division of the international bank (this element is standard to date, but perhaps not so standard in the future with other banks who avoided overt U.S. presence). The U.S. division allegedly marketed Indian banking services to U.S. persons of Indian descent. Mr. Dahake allegedly had bank accounts in BVI and India that he did not report on an FBAR.

And, since the Government now seems to be focusing on the enablers, the indictment names 5 alleged bank related co-conspirators -- 3 U.S. bankers and 2 India bankers, all connected with the international bank.

Further, the indictment alleges that "To further conceal his undeclared bank accounts in the British Virgin Islands, defendant VAIBHAV DAHAKE maintained non-interest bearing accounts that did not generate any interest income." (Of course, that may not only conceal but will also avoid any tax charge related to omitted income; the banks love noninterest bearing deposits.) Notwithstanding this, apparently, the accounts in India did earn income, but the banker co-conspirators assured him it would not be reported to the U.S.

The bankers co-conspirators also encouraged him to structure his transfers of cash to stay below the radar.

There are a lot of other allegations of attempts to hide the monies and their transfer.

Variations on the same theme we have heard before.

There must be a story behind the single consipracy count.


  1. We already know from the two dozen or so recent prosecutions for undeclared offshore accounts, that the government has particular ire for taxpayers who utilized an intermediary entity (foreign corporation, foundation, etc.) in order to obscure true beneficial ownership of the underlying account. Of the various prosecutions to date, most if not all involved such an intermediary entity. (Not that accounts held in individual name are immune, of course.)

    While most of the prosecutions to date relate to UBS account holders, this is the third HSBC related prosecution. The HSBC-India connection is particularly interesting. It's been reported that HSBC had a particular division ("NRI Services") that marketed offshore services to Indian-Americans. Also interesting is that whereas UBS advised American clients that their accounts may be subject to disclosure to the IRS, and therefore suggested pre-emptive disclosure, Americans with accounts at HSBC in India received letters from DOJ in 2010, suggesting that DOJ already had their names.

  2. In terms of money, this may be the lowest among the recent offshore bank account cases. The indictment mentions around 50K Euros as the size of the account. I suppose the government intends to send a message that its not just multi-millionaires or the uberrich, but also small account holders (especially those who try to conceal ownership) that are targets.

    I'm not sure I understand why the bank isn't named -- it seems to be pretty common knowledge by now.


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