By Jason Bramwell
A ruling in a San Francisco federal court on April 29 allows the IRS to seek information on US taxpayers who may have offshore bank accounts in the Caribbean.
Senior District Judge Thelton E. Henderson authorized the IRS to serve a so-called "John Doe" summons on San Francisco-based financial services firm Wells Fargo & Co, according to the Justice Department.
The summons will enable federal tax authorities to identify taxpayers who hold or held interests in financial accounts at Canadian Imperial Bank of Commerce FirstCaribbean International Bank (FCIB) and other financial institutions that used FCIB's Wells Fargo correspondent account from January 1, 2004, through December 31, 2012.
A John Doe summons is used by the IRS to obtain information about possible violations of Internal Revenue laws by individuals whose identities are unknown.
"This John Doe summons is a visible indication of how we are using the many tools available to us to pursue this activity wherever it is occurring", Kathryn Keneally, assistant attorney general for the tax division of the Justice Department, says in a written statement. "Those who are still hiding should get right with their country and their fellow taxpayers before it is too late."
Representatives from Wells Fargo did not respond to requests for comment by AccountingWEB.
According to a written declaration made by IRS Revenue Agent Cheryl Kiger, FCIB has branches in eighteen Caribbean countries, but none in the United States. However, the bank maintains a correspondent account at Wells Fargo Bank N.A.
According to the Justice Department, a correspondent account is a "bank deposit account maintained by one bank for another bank. . . . foreign banks that do business in US dollars, but have no office in the US, obtain a correspondent account at a US bank in order to engage in such transactions."
"Checks drawn on a correspondent account function like any check drawn on an account at a US financial institution and could be deposited or cashed for US dollars at other financial institutions", writes Kiger, who has worked on the IRS Offshore Private Banking Initiative since February 2011. "Based on my experience, I know that a correspondent account can also serve as a means of moving funds into the foreign respondent bank, in this case FCIB."
After researching FCIB in the IRS offshore voluntary disclosure program (OVDP) database, Kiger learned that at least 129 voluntary disclosures had been made by US taxpayers holding undisclosed accounts in the Caribbean.
"I have reviewed all of these voluntary disclosure submissions and they all involve taxpayers who failed to report income related to undisclosed accounts at FCIB and its predecessors", Kiger says in her declaration.
Steven Miller, acting commissioner of the IRS, says in a written statement that the summons marks another milestone in international tax enforcement.
"Our work here shows our resolve to pursue these cases in all parts of the world, regardless of whether the person hiding money overseas chooses a bank with no offices on US soil", he states.