by Brian Mahany
HSBC is the world’s second largest bank. They claim 100 million customers in 7,500 offices in 87 countries. They also just reported to the SEC that they may be facing serious criminal and civil penalties.
For several years, HSBC has been the subject of several investigations. Last year the IRS reportedly served them with a court approved “John Doe” summons seeking the identities of U.S. taxpayers with accounts in their India subsidiary. Rumors circulated over inquiries into offshore accounts in their China and Swiss branches as well. Last month Reuters reported that the U.S. Senate is investigating money laundering at HSBC.
Now the latest reports indicate that the besieged bank is facing scrutiny from the Federal Reserve, Treasury Department, Justice Department and even the Manhattan District Attorney.
The latest allegations are that HSBC USA helped hide illegal transactions with Iran. That conduct could lead to criminal prosecution.
While most of these allegations and inquiries don’t directly affect Americans and foreign U.S. taxpayers with unreported HSBC accounts, the intense scrutiny is likely to lead to the discovery of many of these accounts. Some of the current allegations against HSBC involve removing names or references that point to money being funneled to Iran. While most foreign account holders are not funneling money to Iran, the fact that references have been stripped from account data may cause authorities to scrutinize all holders of foreign accounts.
In its SEC filing, HSBC pledged full cooperation with U.S. officials.
We understand that 99.99% of U.S. taxpayers have absolutely no ties to terrorism or Iran. That should give little comfort to bank customers with unreported offshore accounts, however. The sheer number of inquiries, including IRS John Doe subpoenas and money laundering investigations, mean that HSBC is likely to be under the fed’s microscope for quite some time.
Having an account at HSBC is not illegal. In fact, there are many sound reasons for investing with them or one of their overseas affiliates. Not telling Uncle Sam about the account, however, may be a felony. There are strict civil and criminal penalties for unreported foreign accounts or “financial assets.” Generally, foreign accounts are subject to annual FBAR filings (Reports of Foreign Bank and Financial Account) and this year, the new FATCA law (Foreign Account Tax Compliance Act).
There is presently an amnesty program for taxpayers with unreported foreign accounts. The 2012 Offshore Voluntary Disclosure Program (often called OVDP or OVDI) can help you avoid criminal prosecution and penalties of up to 50% of the high balance of your account for each year the account was not reported.
Have questions about tax amnesty, FBAR or FATCA? Give us a call. Our tax lawyers have helped many people with a wide variety of offshore reporting and other tax questions. For more information, contact attorney Brian Mahany at (414) 704-6731 (direct) or by email at All inquiries are kept strictly confidential and are protected by the attorney client privilege.
Mahany & Ertl – America’s Tax Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. IRS tax services available worldwide.