Prosecutors seek clues on alleged tax dodgers from two U.S. banks

Wed Nov 6, 2013 9:04pm EST

People walk past a Citibank branch in New York October 15, 2013. REUTERS/Andrew Kelly

People walk past a Citibank branch in New York October 15, 2013.

Credit: Reuters/Andrew Kelly

(Reuters) - U.S. authorities are seeking information from Citigroup Inc's Citibank NA and Bank of New York Mellon Corp to uncover the identities of U.S. citizens who may have been hiding money in Swiss bank accounts to avoid taxes.

In a filing in Manhattan federal court on Wednesday, the U.S. Attorney for the Southern District of New York requested permission to issue "John Doe" summonses to the two U.S. banks for records of accounts tied to the Swiss bank Zuercher Kantonalbank (ZKB).

ZKB, based in Zurich, offers private banking to clients around the world, including U.S. taxpayers, according to the filing. Some of those services are provided through correspondent accounts at Citibank and BNY Mellon, it said.

Both banks are not accused of any wrongdoing in the court filing.

In December 2012, two ZKB bankers and a former employee were indicted over charges of conspiring with American clients to hide more than $420 million from the U.S. Internal Revenue Service.

ZKB used Citibank and BNY Mellon as correspondent banks to provide offshore banking services to U.S. taxpayers, "who in turn have failed to report the existence of their ZKB accounts to the IRS, as well as the income earned on those accounts," the U.S. Attorney's office said in its filing.

The IRS uses "John Doe" summonses to get information on possible tax law breakers whose identities are unknown.

In April, the IRS got a court's permission to serve John Doe summonses to Wells Fargo & Co as part of an offshore tax evasion investigation.

With John Doe summonses, "what the U.S. is trying to do is figure out who accessed their undeclared Swiss bank account money, and did anyone access it in a way that flowed through U.S. banks," said Jeffrey Neiman, a former federal prosecutor involved in Swiss bank investigations who is now in private law practice in Fort Lauderdale, Florida.

Banking secrecy is enshrined in Swiss law and tradition but has recently come under pressure as the United States and other nations have moved aggressively to tighten tax law enforcement and demand more openness and cooperation.

The case is In the Matter of the Tax Liabilities of John Does, U.S. District Court, Southern District of New York, No. 13-mc-378.

(Reporting by Terry Baynes in New York and Patrick Temple-West in Washington; Editing by Lisa Shumaker)

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