IRS targets First Caribbean International Bank over tax evasion

A Caribbean bank formerly co-owned by Barclays has been targeted by US tax authorities seeking information on suspected American tax evaders.

The Internal Revenue Service (IRS) has filed a "John Doe" summons – a request for information on an unknown number of unnamed people – against US taxpayers with offshore accounts at FirstCaribbean International Bank (FCIB), who it suspects of having used accounts with the bank as parts of efforts to illegally evade US tax.

The First Caribbean International Bank was formed in 2002 from the merger of Barclays' banking operations in the Caribbean and those of CIBC, a Caribbean bank. Barclays maintained a large shareholding in the resultant company of more than 40% until December 2006, when it sold the stake. The IRS request for information extends back to 2004, during the period of Barclays' co-ownership of FCIB, and also details some activity directly involving Barclays branches in the Caribbean before the formation of FCIB.

A witness statement filed in support of the summons by IRS agent Cheryl Kiger details how, during her investigation into a leak of offshore data, she came across information suggesting FCIB and Barclays accounts may have been used by tax evaders. "I discovered information about a US taxpayer (Taxpayer 1) who had opened numerous bank accounts at FCIB and its predecessor Barclays bank in a Caribbean jurisdiction in his own name and in the names of various shell companies he controlled," she wrote.

"Taxpayer 1 did not report any income arising from the transactions involving these FCIB accounts."

Kiger also disclosed information obtained from a programme allowing individuals who have previously evaded US tax to voluntarily disclose this information and receive less stringent penalties.

She identified at least 129 such cases which had involved the use of bank accounts with FCIB "its predecessors in the Caribbean".

The summons uses the fact that the US bank Wells Fargo maintained "correspondent" accounts to access its offshore accounts from within the United States as part of the basis for its claim.

The summons is seeking information on customers of FCIB or its predecessors who may have avoided US tax. It makes no application for information on the activities of the banks themselves, and nor does it suggest the banks had any intention of supporting, or direct knowledge of, such activities by their customers.

However, they do detail how such private banking arrangements, and the use of "correspondent" accounts to allow easy access to such funds, help facilitate such potential tax evasion.

"The experience of the IRS has shown that not only private banking relationships can be used to conceal ownership of funds from tax authorities and others," said Kiger.

"The practice of offshore banks using correspondent accounts for the purpose of accessing the United States financial market and its banking customers has similarly received substantial attention"

The information request about people banking with FCIB is believed to be part of a cross-border investigation between tax authorities in the USA, UK and Australia – potentially the biggest in history – based on 260GB of leaked offshore documents, also obtained by the International Consortium of Investigative Journalists, and used by the Guardian for its Offshore Secrets series. The documents, which are internal databases and communications from two offshore incorporation bodies in the British Virgin Islands, contain multiple references to individuals moving funds between accounts owned by offshore companies with whom they have no official connection (thanks to "sham", or nominee directors) and accounts in their own names, including accounts at both Barclays, and then subsequently FCIB.

The documents use the case of "taxpayer 2" to explain how these elaborate arrangements help people conceal their assets from tax authorities across the globe.

"Taxpayer 2 did not have direct signature authority over the FCIB account, but exercised actual authority through the nominal owner of his shell company, which followed his instructions with regard to the account," the declaration notes.

A spokesman for Barclays said the bank had no link to the IRS investigation.

"Barclays sold its minority stake in this business in 2006 so any questions about First Caribbean should be addressed to that business," he said. "The attempts to link any on-going investigation into First Caribbean to Barclays is disingenuous and misleading for your readers."

A spokesman for Canadian Imperial Bank of Commerce, which has a majority stake in FCIB, said: "We are committed to complying with all laws and regulatory requirements. We are working with Wells Fargo, our correspondent bank, to understand the nature of the order. It is our intention to co-operate with authorities in accordance with the respective laws of all jurisdictions involved."

A spokesman for Wells Fargo said: "Wells Fargo intends to respond to the order as legally required."

guardian.co.uk © Guardian News and Media 2013