U.S. authorities are reportedly targeting a Belize-based bank in a brazen bid to try and extract names of US citizens with accounts at the Bank.
A federal court in Miami on Wednesday approved a special “John Doe” legal summonses seeking information about U.S. taxpayers who may hold undeclared accounts at Belize Bank International Limited (“BOBI”)
The court order gave federal investigators authorization to seek records of so-called correspondent accounts maintained by BOBI at Bank of America and Citibank. The US IRS is hoping to extract information from those records, (“Correspondent” accounts enable foreign banks without a U.S. presence to handle transactions in U.S. dollars), to help the IRS identify U.S. taxpayers who hold or held accounts at or with BOBI.
Given the nature of a “Correspondent” Bank Account – where the account is held in the name of a Bank and not an individual – the manoeuvre smacks of desperation of the highest order. Why? (a) Because most people bank Offshore in the name of a Company and (b) Even if the correspondent bank hands over details of the BOBI’s account held at the correspondent bank it will not reveal the names of the beneficial owners of the account (eg if the account is held in the name of a Company); the only information on file at the correspondent Bank will be the name of the BOBI account holder (which in 99% of cases will be a Privacy Haven Tax Free Offshore Company).
Moreover such a move is a disincentive to persons and businesses the world over (not just Americans banking offshore) to transact in USD. Like bycatch in an illegal whale hunt the manoeuvre risks the name of non US persons with accounts at BOBI being revealed to the US Courts. Doubtless smart investors will become aware of this and will start transacting in stable non USD currencies.
The court action marks federal investigators’ latest use of the special summonses to try and compel account disclosures by offshore banks suspected of helping American clients evade U.S. taxes. The IRS previously used the tactic to pursue account data from banks elsewhere around the world, including Switzerland’s Zurcher Kantonalbank, Bermuda-based N.T. Butterfield & Son and Swiss banking giant UBS.
This case however seeks to push the envelope in that each of the aforesaid banks either had Banking licenses in or a physical presence in the US such as might afford the US courts some, albeit tenuous, jurisdiction.
Moreover the case smacks of desperation in that it is the first time that the US IRS has attempted to extract bank account holder information from a bank with zero US presence.
It will be interesting to see how BOBI responds. If I were their Lawyer I would either ignore the order or appeal the decision . It’s hard to see how the US Courts can legitimately claim that they have jurisdiction…
Two things that can be said for sure and certain are:
(a) That US residents (and non US Residents) banking Offshore will soon begin to abandon the USD in favour of other currencies; and
(b) More and more Americans will be looking to set up Private Offshore Foundations as a way of shifting “legal and beneficial ownership of their Offshore Companies/Bank Accounts away from any US person/s.
(Even if only as a hedge bet) if I were an American banking Offshore I would (if I could) only be transacting in currencies other than the USD.