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Fresh HSBC Details Raises the Call for Tax Fraud Action

While most of us still have a couple of months to file our 2014 tax returns, now is the time when W-2s and 1099s start rolling in, reminding us that tax day has a way of sneaking up on us. However, for the United States and other nations' tax authorities, taxes are a year-round concern. Recent news from HSBC has brought to light fresh details over the extent of tax evasion in Switzerland. 

The news over Swiss banking's involvement in alleged tax evasion is nothing new. As early as 2008, anonymous emails were sent out to European tax authorities, with the subject line, "Tax evasion: client list available." The message was later traced to former HSBC employee, Herve Falciani. HSBC, as well as approximately a dozen other Swiss banking institutions remain under investigation by the U.S. Department of Justice (DOJ).

Recently, more details have come from Falciani, released by the International Consortium of Investigative Journalists. Falciani has alleged HSBC was involved in sheltering accounts fordictators and arms dealers, including those on U.S. sanctions lists. Falciani was a computer analyst with HSBC before he turned whistleblower. In the meantime, Swiss authorities are seeking extradition of Falciani from Spain to face crimes including violating Swiss bank secrecy.

After the recent details were released, Ohio Senator, Sherrod Brown, leading Democrat on the Senate banking committee, is calling for action. U.S. regulators had been provided with the leaked data five years ago. Now, Brown is wondering what has been made of the information. "I will be very interested to hear the government's full explanation of its action or lack thereof - upon learning of these allegations in 2010," said Brown. He continued, "I intend on pressing regulators, the IRS and the DOJ for answers."

The leaked banking information involves 30,000 bank accounts, totalling almost $120 billion. As many as 2,900 of those bank account clients have ties to the U.S., which may involve tax evasion by Americans hiding money in secret Swiss accounts. HSBC, after striking a deal with the DOJ, paid a $1.9 billion fine in 2012 for their role in enabling clients to subvert government sanctions against deals with Cuba, Sudan and Iran.

While the Swiss banks may be the most notorious of the offshore banking perpetrators, the DOJ's Tax Division investigates offshore banking operations in India, Israel, and other countries. A California doctor was recently charged with failing to report foreign bank accounts totalling at least $8 million. The money was transferred to an undeclared Israeli bank's Luxembourg branch. The doctor has already settled a civil penalty, agreeing to pay $4.2 million, but still faces up to 5 years in prison for his activities.

However, the problem goes deeper than banks enabling tax evasion, in some cases the banks themselves are working to avoid paying their own tax bill. Late last year, Deutsche Bank was sued by the Justice Department for allegedly using shell companies to conceal profits on its own behalf, to avoid U.S. taxes. The DOJ is seeking more than $190 million in back taxes, interest, and penalties.

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