IRS Targets Non-Resident Indians with HSBC Accounts

HSBC, one of the largest banks international banks in the world, is facing rough time with allegations on its holding bankers being involved with a New Jersey Indian American businessman in hiding his bank accounts in India from the Internal Revenue Service.

Court documents from federal court in Newark, NJ last week revealed that Vaibhav Dahake allegedly planned the undisclosed offshore accounts with five bankers from a bank that has headquarters in England. The people familiar with the probe confirmed it to be the HSBC Bank. It was also said that the bank operated a US division which was called NRI (Non-Resident Indian) Services, which promoted offshore banking services to American citizens with Indian origin (like many banks with Indian branches).

Mr. Dahake is accused of conspiring with two bankers of U.S., one from California and other from New York and two from Thane, India. Dahake is the first taxpayer to be charged with in the issue focusing on whether HSBC is involved with the clients in hiding their assets from the IRS. Dahake, an Indian native who became U.S. citizen in 2006, has filed alleged false tax returns. It is claimed that the bankers helped him in hiding ownership and income of undeclared accounts in India and Britain Virgin Islands (he was even asked to not speak in English over the telephone regarding such matters). The indictment also says that Davake’s British Virgin Islands account were not paying interest and thus the bank asked him to an open account in India in order to get high interest rates.

This is not good for NRI accountholders (or HSBC), but this is not a big coincidence. It is not surprising that these cases are making news right now (see posts earlier this week). The IRS is ramping up efforts to identify offshore accounts and we believe, at least publicly, they want taxpayers to understand that this is not just about Swiss banks (and UBS Bank). Expect to see the IRS to focus to target foreign accounts in the near future. A new IRS amnesty program is expected very soon.

Once again, our firm will assist (and defend) clients to legally disclose (and legitimze) foreign accounts.