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Bank Executives Alert: Feds Focusing Upon Bankers in Money Laundering and Tax Fraud Investigations Involving Overseas Bank Accounts – and U.S. Bankers May Be Facing Federal Indictments

This week, two New York federal district judges signed federal court orders that allow the Internal Revenue Service (IRS) to serve “John Doe summonses” on several different American banks. These are big banks, like the Bank of New York Mellon (Mellon); Citibank NA (Citibank); JPMorgan Chase Bank NA (JPMorgan); HSBC Bank USA NA (HSBC); and Bank of America NA (BOA).

It’s being allowed as part of the IRS’s investigation into tax evasion and hiding money in overseas bank accounts including those accounts at Zurcher Kantonalbank and its affiliates in Switzerland (ZKB) and The Bank of N.T. Butterfield & Son Limited and its affiliates in well-known offshore havens like the Bahamas, Barbados, Cayman Islands, Hong Kong, and Switzerland.

What is a John Doe summons? These “John Doe summones” are similar to ordinary Texas subpoenas that most people recognize, and can be served when the IRS does not know the identities or names of those persons that are potential violators of federal law, like individuals that may be moving money around to avoid taxes or to launder cash.

They force the banks to produce bank records to the IRS that reveal the identities of owners of bank accounts held at their financial institutions. The John Doe summons makes the bank turn over the contact information in its files that corresponds to the bank accounts that the IRS is investigating.

If the IRS finds bad things in that account, the result can be federal charges being brought not only against the account holder but also against the banker.

That’s right: the bank executive can be arrested, too.

For instance, in December 2012, federal indictments came down against 3 bankers working at ZKB alleging that the bankers were conspiring with U.S. taxpayers (and others) to hide over $423 million from the IRS in secret Swiss bank accounts.

Congress Is Considering Passing the “Holding Individuals Accountable and Deterring Money Laundering Act” – Bankers are a Focus Here

Right now, the House of Representatives is considering new legislation proposed by two members of the House Financial Services Committee known as the “Holding Individuals Accountable and Deterring Money Laundering Act” that will also increase the heat for U.S. bankers and bank executives. The bill is being promoted as new legislation that will help federal investigations into money laundering by boosting the enforcement possibilities for violations of the Bank Secrecy Act, closing loopholes and giving federal agencies more authority to go after banks allegedly engaged or involved in money laundering activities.

One specific target of the proposed act is the use of shell companies in money laundering operations. Why? Shell companies are a big deal in money laundering schemes, where large amounts of cash are transitioned for the purposes of laundering money – as well as avoiding federal taxation.

The legislation would push banks and bank executives to be vigilant in looking among their account transactions for possible money laundering activities. Key to this new law – giving the federal government the power to hold bankers and bank executives personally responsible for failures to comply with the Bank Secrecy Act regarding money laundering.

That’s right: the banker would be found personally responsible for money laundering done by account holders.

Bank executives and top bankers at U.S. banks and financial institutions additionally would face harsher sentencing if found guilty of not complying with the Bank Secrecy Act – making these white collar bank defendants potentially facing 20 years imprisonment instead of the Act’s current 5 year term.

The proposed new law would also empower an organization within the Treasury Department called the Financial Crimes Enforcement Network (FinCEN), its money-laundering investigation arm, to pursue criminal cases on its own instead of having to rely upon other federal agencies to do the actual litigation of the money laundering cases that FinCEN has built.

Already, the Treasury Department has moved toward focusing on bankers and bank executives regarding money laundering. For instance, bank examiners at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have been handing out more fines regarding failure of banks to comply with in place anti-money laundering programs.

Why go after the bankers and bank executives themselves?

Perhaps the answer can be found in a New York Times editorial responding to the decision last year by the authorities not to file indictments against HSBC Bank because the bank was considered “too big to fail.” There was a financial settlement but no criminal prosecutions.

Maybe if the bank itself is too big to face criminal indictment, targeting some of its bank executives seems like a nice alternative to the federal authorities.  Bankers, take note.


For more information on money laundering, check out our web resources page as well as recent Case Results involving defending against money laundering charges in Texas including this recent case out of Collin County.




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