Sunday, November 10, 2013

New John Doe Summons to U.S. Banks for Information About Correspondent Offshore Banks (11/10/13)

Reuters reports that John Doe Summons requests have been filed "seeking information from Citigroup Inc's Citibank NA and Bank of New York Mellon Corp to uncover the identities of U.S. citizens who may have been hiding money in Swiss bank accounts to avoid taxes."  Patrick Temple-West and Terry Baynes, Prosecutors seek clues on alleged tax dodgers from two U.S. banks (Reuters 11/6/13), here.  The Swiss banks targeted is Swiss bank Zuercher Kantonalbank (ZKB).  The U.S. banks from whom the records are sought "are not accused of any wrongdoing in the court filing."  Key excerpts:
ZKB, based in Zurich, offers private banking to clients around the world, including U.S. taxpayers, according to the filing. Some of those services are provided through correspondent accounts at Citibank and BNY Mellon, it said. 
* * * * 
ZKB used Citibank and BNY Mellon as correspondent banks to provide offshore banking services to U.S. taxpayers, "who in turn have failed to report the existence of their ZKB accounts to the IRS, as well as the income earned on those accounts," the U.S. Attorney's office said in its filing. 
* * * * 
With John Doe summonses, "what the U.S. is trying to do is figure out who accessed their undeclared Swiss bank account money, and did anyone access it in a way that flowed through U.S. banks," said Jeffrey Neiman, a former federal prosecutor involved in Swiss bank investigations who is now in private law practice in Fort Lauderdale, Florida.
ZKB is, of course, one of the 14 banks excluded from the recent Swiss bank "amnesty" initiative.  See blogs on the initiative here.

The way the article is written, it seems that the JDS request has been made but not yet approved by the court.  In the past, the filing did not usually become public until the order is granted.  Of course, the odds that a court would not grand a JDS is probably low but not unheard of.  John Doe Summonses & Statutes Of Limitations (Federal Tax Crimes Blog 5/27/11), here.

The target(s) of these summonses appear to be the U.S. taxpayers using the facilities of the correspondent banks to access their ZKB accounts, but almost certainly will also contribute materially to the ongoing investigation of ZKB.  Note in this regard that, by being excluded from the U.S. Swiss bank initiative, ZKB may be in a hunker down mode, without a strategic need to deliver up their U.S. customers.  At least for now, because there will certainly come a time when it will be in ZKB's strategic advantage to come all the way clean (or at least as clean as they think they have to).

Addendum 11/12/13 6:00 pm:

According to this article, the court granted the JDS.  David Voreacos, Citigroup, BNY Mellon Records Sought by IRS in ZKB Tax Probe (1) (Bloomberg Business 11/12/13), here.

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