HSBC expects significant penalties in NRI tax evasion probe

Global banking major HSBC said it might face "significant" penalties from the US authorities in an ongoing probe into suspected tax evasion by the US-based clients of its Indian unit, as also other cases, according to a PTI report.

The US tax department was probing possible federal income tax evasion by US residents of Indian origin through their HSBC India accounts according to the agency's report.

In a regulatory filing last night, the lender said, it was cooperating with the US Department of Justice and the Internal Revenue System (IRS) into probes as to whether certain HSBC companies and employees acted appropriately as regards certain customers with US tax reporting requirements.

The disclosure from the UK-based HSBC came as part of an update of the ongoing "regulatory and law enforcement investigations", along with the first quarter results of the bank

As regards the case involving its Indian unit, the banking giant said that HSBC Bank USA in April 2011 had received a 'John Doe' summons from the IRS, calling for production of records with respect to US-based clients of an HSBC Group company in India.

The term, 'John Doe' summons is used in the US when the Internal Revenue Service asks a third party to provide information on an unnamed, unknown taxpayer with potential tax liability. In such summons the unnamed person is addressed as 'Jon Doe'.

HSBC said it had fully cooperated by providing responsive documents in its possession in the US to the IRS.

In respect of another case, HSBC said it had also received in April 2011 a subpoena from the US markets regulator SEC, calling for HSBC Bank US to provide records of HSBC Private Bank Suisse SA's cross-border policies and procedures as also adherence to US broker-dealer and investment adviser rules and regulations in its dealing with US resident clients.

It said HSBC Bank USA continued to cooperate with SEC, adding that based on the facts currently known in respect of each of these investigations, it was not practicable at this time for it to determine the terms on which these ongoing investigations would be resolved or the timing of such resolution or for it to estimate reliably the amounts, or range of possible amounts, of any fines and/or penalties.

The lender said, as matters progressed, it was possible that any fines and/or penalties could be significant.

The US justice department had back in 2011, said that the IRS was demanding information from HSBC Bank USA about the US residents who may be using accounts at HSBC India "to evade federal income taxes".