I previously reported that the IRS has summonsed UBS for records from a Singapore affiliate and had sought judicial enforcement of the summons. U.S. Summonses Singapore Bank Records from UBS (3/4/16 & 3/5/16), here. DOJ Tax has announced in a press release, here, that UBS "has now produced all Singapore-based records responsive to the request and the IRS determined that UBS complied with the summons, the Justice Department has voluntarily dismissed its summons enforcement action against the bank." The press release explained, somewhat cryptically:
The IRS served an administrative summons on UBS for records pertaining to accounts held by Ching-Ye “Henry” Hsiaw. According to the petition, the IRS needed the records in order to determine Hsiaw’s federal income tax liabilities for the years 2006 through 2011. Hsiaw transferred funds from a Switzerland-based account with UBS to the UBS Singapore branch in 2002, according to the declaration of a revenue agent filed at the same time as the petition. UBS refused to produce the records, and the United States filed its petition to enforce the summons.JAT Comments:
1. According to the U.S.'s Motion for Voluntary Dismissal,(Dkit. 16), there was no formal show cause hearing or order to enforce. Rather,
Shortly after the petition was filed, the parties engaged in discussions to determine if they could resolve the matter amicably and without the necessity of any further court involvement. Upon completion of those discussions, UBS AG advised the United States that it would comply with the IRS summons and produce all Singapore-based bank records responsive to the IRS summons. On May 31, 2016, UBS AG served its initial document production and, thereafter, supplemented its production on June 10, 2016. On June 17, 2016, after reviewing the bank’s document production, the IRS determined that UBS AG has complied with the IRS summons. In view of the above, the United States voluntarily dismisses its petition with prejudice.2. [Corrected 6/23/16] UBS has indicated that "complied with the summons based on client consent in accordance with Singapore law." David Voreacos, UBS Gives IRS Records on U.S. Citizen’s Account in Singapore (Bloomberg 6/22/16), here.. In an earlier posting of this blog I stated that it was not clear on the documents I reviewed why UBS provided the documents required by the summons. [End of Correction] Readers will likely recall the earlier UBS proceeding involving a John Doe Summons to UBS that was the starting point for the IRS and DOJ's offshore account initiative starting around 2008. The summons in this case was a regular summons, although since it was for financial account records, it might have been a third party recordkeeper summons. The summons is here. The key difference would be that, in a criminal investigation, regular summonses require no notice to the taxpayer but third party recordkeeper summonses do. § 7609(c)(2)(E). [Addition 6/24/16] Asher Rubinstein noted in the comment below that the summons was a Bank of Nova Scotia Summons, which, I understand is just a regular summons to an affiliated entity of a foreign bank for records of the affiliated foreign bank. I discussed this issue when originally reporting on the case. U.S. Summonses Singapore Bank Records from UBS (Federal Tax Crimes Blog 3/4/16 & 3/5/16), here, see particularly paragraph 1 under JAT Comments. [End of Addition]
3. Normally, in high stakes summonses, if the summonsed third party has an interest in not producing the documents (and certainly, given UBS's role as a player in the offshore account market, it has that interest), it might await a formal order from the Court. This would then give the summonsed party some cover with the client and perhaps, in this case, with the regulatory authorities in the foreign jurisdiction whose bank secrecy laws may be implicated. [Clarification 6/23/16] In this case, however, since the client apparently consented to the disclosure, UBS did not need such cover. [End of Clarification]
4. [Correction 6/212/16] As note noted in the corrections above, UBS did not cave and therefore this brouhaha is mooted in terms of its future effects, but I have to think that, if the IRS did it once, it will do it again in either a regular summons (perhaps of the thirdparty recordkeeper genre) or a John Doe Summons. [End of Correction]
5. Singapore does not have a tax treaty or mutual legal assistance with the U.S., for exchange of such tax information, so there is no formal mechanism for exchange of information that might permit a specific request to a named taxpayer or what has become known as a group request for unidentified U.S. taxpayers meeting certain characteristics. (I call such group requests under a treaty request a John Doe Treaty Request.)
6. It is interesting that the press release specifically mentions that Hsiaw apparently moved his account from UBS Switzerland to the UBS affiliate in Singapore in 2002. The IRS has been obtaining so-called leaver lists from Swiss Banks, but I was not aware that they would go all the way back to 2002. Of course, UBS is a special situation so that the IRS may have obtained such a leaver list or even the UBS bank records on U.S. clients from 2002.