by Brian Mahany
We have been sounding the warnings for many months about HSBC. The British banking giant – it is the 2nd largest bank in the world with almost 10,000 offices in 85 countries – has been under one sort of investigation or another in recent years. Accusations raised by the U.S. Attorney in West Virginia against the bank spell trouble for U.S. taxpayers with unreported HSBC foreign accounts.
United States Attorney William Ihlenfeld compared the bank to a “nuclear waste dump.” Federal prosecutors believe that HSBC has violated anti money laundering regulations and the federal Bank Secrecy Act. That means regulators and prosecutors will likely want to review all accounts at the bank that are owned or controlled by U.S. taxpayers. Many Americans have accounts at HSBC Switzerland, HSBC India and in the Bahamas; accounts that were not properly reported to the government.
Although owning a foreign bank account is completely legal, the law requires taxpayers to disclose the account annually to the IRS on a Report of Foreign Bank and Financial Account, more commonly known as an FBAR. Failure to file an FBAR can be a felony and the IRS can and routinely does levy penalties of $100,000 or 50% of the account value for each year the account was not declared.
In addition to the recently disclosed report by the U.S. Attorney’s Office, several other investigations are also continuing. According to published reports, the Senate Permanent Subcommittee on Investigations is also looking at HSBC. In a filing with the SEC, earlier this year the bank said that the Office of the Comptroller of Currency, Federal Reserve and Office of Foreign Assets Control (OFAC) were also investigating the bank. OFAC is a little known federal agency that has tremendous powers including the ability to freeze assets. None of this is good news for Americans with unreported offshore accounts.
If you have an unreported foreign account, its not too late to avoid prosecution and possible loss of your account. There is presently a tax amnesty called the 2012 Offshore Voluntary Disclosure Program (“OVDI”) that allows taxpayers to come forward and avoid prosecution. There can be steep penalties associated with the program but those are much less than if the feds discover the account first.
Many foreign accounts are owned by dual nationals, recent immigrants to the U.S., and foreigners who work here but send money home to support their family. Taxpayers that can prove their oversight was innocent may do better with a traditional disclosure. There are no guarantees, of course, but the penalties are much lower. Traditional disclosures almost always involve an audit.
The decision whether to make a traditional disclosure or avail oneself of the OVDI amnesty program should be made after consulting with competent tax counsel. The decision to come forward and declare an unreported account is a “no-brainer,” however. Holders of unreported accounts at HSBC, even for accounts recently closed, are likely to be caught. The IRS routinely goes back many years meaning that any unreported account could easily lead to penalties that far exceed the original value of the account!
If you have an unreported Swiss or Indian bank account (or anywhere else for that matter), give us a call. All inquiries are protected by the attorney – client privilege and are kept in strict confidence. We have helped many taxpayers through this difficult process. For more information, contact attorney Bethany Kroes at or attorney Brian Mahany at . For immediate assistance, contact Bethany at (414) 223-0464 or Brian at (414) 704-6731 (direct).
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS services available nation and worldwide.