The Bahamian Leadenhall Bank & Trust Company is facing an April 15 deadline to release records of clients who fail to adhere to the Offshore Voluntary Compliance Initiative, or face prosecution.
On Thursday, the United States Justice Department and Internal Revenue Service filed petitions in seven federal courts seeking records from MasterCard accounts at Leadenhall.
The move, a first for the U.S. Government, targeted people suspected of using credit and debit cards issued by offshore banks to hide income from U.S. tax collectors.
The petitions were filed in federal courts in California, Florida, Nevada, North Dakota, Maryland and Tennessee. They seek court orders against people that would require they turn over records the IRS believes would show they are hiding income.
"These legal actions across the country mark a new stage in our continuing efforts targeting offshore tax evasion," said Acting IRS Commissioner Bob Wenzel.
"From coast-to-coast, we are taking a close, careful look at those who may be involved in offshore tax cheating. We've already identified thousands of taxpayers for potential examination on offshore issues and dozens for potential prosecution."
Mr. Wenzel said people entangled in offshore tax evasion have a chance to come forward and make things right, but warned that time is running out on this last chance as April 15 is the deadline for people to apply to the OVCI.
"The combination of these events should send a strong, unmistakable signal to those involved in offshore tax cheating. We will continue to aggressively pursue those who aren't paying their fair share," Mr. Wenzel said.
U.S. Treasury Assistant Secretary for Tax Policy Palm Olson warned that taxpayers who don't pay their fair share of taxes undermine the faith of honest taxpayers in the U.S. tax system.
According to publicly filed court documents, the summons enforcement petitions were filed against individuals who used a MasterCard payment card issued by the Leadenhall Bank & Trust Company. The were filed after the individuals did not produce for examination books or records requested in earlier IRS summonses.
The Associated Press reported that the IRS has obtained thousands of Visa, MasterCard and American Express records involving accounts at dozens of banks in tax-haven countries. But Thursday's move was the first time since the initiative began in October, 2000, that individual Americans have been targeted.
It is legal to have a credit or debit card issued by an offshore bank. But it is a violation of U.S. tax laws to hide income from the IRS in these accounts and then use the payment card to access them in the United States. Bank secrecy laws in tax-haven countries make the money difficult to trace.
Thousands of individuals who have the cards will face audits, and several dozen cases have been referred for possible criminal prosecution.
The IRS says it was determined that initial estimates that one million cardholders may have illegal offshore accounts were high because many people have multiple accounts.
By Lindsay Thompson, The Nassau Guardian
