Court Approves John Doe Summons to Belize Banks (9/17/15)

DOJ announces here that a district court authorized the IRS "to serve a 'John Doe'” summons seeking information about U.S. taxpayers who may hold offshore accounts at Belize Bank International Limited (BBIL) or Belize Bank Limited (BBL)."  The petition, memorandum in support and declaration of the agent are here.

The key summary from the press release is:

According to the IRS declaration, BBL is incorporated and based in Belize, and directly owns BBIL.  The IRS declaration further states that Belize Corporate Services (BCS) is incorporated and based in Belize and offers corporate services including the purchase of “shelf” Belizean international business companies.  BBL, BBIL and BCS are all corporate subsidiaries of BCB Holdings Limited, according to the declaration.  The declaration describes and IRS Revenue Agent’s review of information submitted by BBL and BBIL customers who disclosed their foreign accounts through the IRS offshore voluntary disclosure programs.  The customers in the “John Doe” class may have failed to report income, evaded income taxes, or otherwise violated the internal revenue laws of the United States, according the declaration. 

The IRS uses what are known as “John Doe” summonses to obtain information about possible violations of internal revenue laws by individuals whose identities are unknown.  The John Doe summonses approved today direct Citibank and Bank of America to produce records identifying U.S. taxpayers with accounts at Belize Bank International Limited, Belize Bank Limited, or their affiliates, including other foreign banks that used BBIL and BBL’s correspondent accounts to service U.S. clients.  The court also granted the IRS permission to seek records related to Citibank’s and Bank of America’s correspondent accounts for BCS and information related to BCS’s deposit accounts at Bank of America.  

A correspondent account is a bank account that one bank maintains for another bank.  Financial transactions involving U.S. dollars flow through U.S. banks; therefore, foreign banks that do business in U.S. dollars, but do not have an office in the United States, obtain a correspondent account in order to reach U.S. customers.  Transactions in the correspondent account leave a trail in the United States that the IRS can follow, including by using a John Doe summons.  The John Doe summons can let the IRS obtain records of money deposited, paid out through checks, and moved through the correspondent account through wire transfers. 

* * * * 

The Justice Department has previously obtained similar orders from the U.S. District Court of the Southern District of New York, permitting a John Doe summons on UBS AG for records of Swiss bank Wegelin & Co.’s correspondent account at UBS and from the U.S. District Court of the Northern District of California, permitting a John Doe summons on Wells Fargo, N.A., for records of the Barbados-based Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB).

The petition,memorandum and declaration here set forth the detail behind this summary.

These banks will be added to the IRS's Foreign Financial Institutions or Facilitators, here.  U.S. taxpayers with accounts in the listed banks joining OVDP after one of their banks are listed will be subject to the 50% penalty in OVDP (provided that they do not opt out, in which case, who knows).