U.S. Department of Justice Investigating Eight Offshore Banks

Eight offshore banks are being investigated by a federal grand jury for facilitating tax evasion by U.S. citizens. Disclosed on a part of the U.S. Department of Justice’s website, as part of the Tax Division’s Offshore Compliance Initiative, the actual banks under investigation have not been named, but this is the first time the DOJ has reported a number.

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In 2009, UBS AG (NYSE:UBS) was charged with aiding tax evasion by U.S. clients, avoiding prosecution by paying $780 million, admitting it had fostered tax evasion, and giving the U.S. Internal Revenue Service data on over 350 accounts, later turning over data on another 4,450. Prosecutors opened 150 grand jury investigations into offshore clients, ultimately charging 30 and indicting another 13 people who had facilitated the hiding of assets.

“The fact that the department has confirmed that there are eight grand jury investigations into offshore banks shows that the government’s enforcement efforts are a lot further along than had previously been disclosed,” said Jeffrey Neiman, a former federal prosecutor who worked on the UBS case.

Neiman notes that it is uncommon for the government to “trumpet” the opening of a grand jury investigation, and that, in fact, “the department is prohibited by law from speaking about matters occurring before the grand jury.” Normally these investigations are shrouded in secrecy, said Neiman.

The U.S. has filed criminal tax charges against more than three dozen former clients of the Zurich-based UBS, Credit Suisse (NYSE:CS), and London-based HSBC Holdings (NYSE:HBC) since 2008. Most of those clients have since pled guilty. On September 4, it was reported that Switzerland had until September 6 to provide the U.S. Justice Department’s investigation with data on Credit Suisse. The DOJ has requested information on accounts held by thousands of Americans in 10 offshore banks, including Credit Suisse.

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Since 2009, about 30,000 taxpayers have disclosed offshore accounts to the IRS as part of a limited amnesty program, thus avoiding prosecution. In a second round of the program offered this year, 12,000 more taxpayers voluntarily disclosed their accounts, bringing in $2.7 billion in revenue for the IRS.

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