The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Bahamas-based financial executives yesterday described a US court’s decision to permit the Internal Revenue Service (IRS) to serve a summons on CIBC FirstCaribbean Internationa Bank’s US correspondent bank as a “scary move”.

The US tax collection authority was given permission by a San Francisco judge to serve Wells Fargo with a summons seeking information on US taxpayers it believes hold offshore accounts with the Canadian-owned bank, which has its regional headquarters in the Barbados but operates in 18 other Caribbean nations - including the Bahamas.

Employing tactics it has successfully used against Swiss banks to uncover the identities of US taxpayers it believes are hiding assets and money offshore, thereby evading taxes, the IRS - via a US Justice Department statement - said the summons would force Wells Fargo to disclose the names of CIBC FirstCaribbean’s American customers.

There was no mention of whether these US clients were suspected of having accounts at CIBC FirstCaribbean’s Bahamas operations, or elsewhere in its Caribbean network.

However, the IRS move now indicates that US tax authorities may be starting to move against Caribbean-based financial institutions suspected of being used by Americans to evade due taxes.

It will merely add to the pressure on the industry, which is being hit from all sides by numerous global initiatives and regulatory pressures - particularly the US Foreign Account Tax Compliance Act (FATCA) and the OECD/G-20 push for the automatic exchange of tax information to become the global standard.

The US Justice Department said in a release that based on the declaration by IRS revenue agent, Cheryl R. Kiger, “the IRS learned that US taxpayers were using CIBC FirstCaribbean to help them keep their offshore accounts undetected by the IRS and not to pay US federal income tax on money placed in those offshore accounts.

“Kiger’s declaration describes her review of the information submitted by more than 120 CIBC FirstCaribbean customers who participated in the IRS’s Offshore Voluntary Disclosure Programme. According to the Kiger declaration, many of the CIBC FirstCaribbean customers in the John Doe class may have been under-reporting income, evading income taxes, or otherwise violating the internal revenue laws of the United States.”

“The Department of Justice and the IRS are committed to global enforcement to stop the use of foreign bank accounts to evade US taxes,” said Kathryn Keneally, assistant attorney general for the US Justice Department’s Tax Division.

“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. Those who are still hiding should get right with their country and their fellow taxpayers before it is too late.”

“This summons marks another milestone in international tax enforcement,” said IRS acting commissioner, Steven T. Miller. “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.”