Uncle Sam's war against offshore tax evasion has hit Singapore's shores in a case brought by the United States Internal Revenue Service (IRS) to get records on an account held in Singapore by a US taxpayer.
IRS has asked a federal judge in Miami to force Swiss bank UBS Group to cough up 10 years' worth of financial records from the Singapore account of US citizen Hsiaw Ching-Ye, aka Henry Hsiaw, who now lives in China.
It alleged Mr Hsiaw had not filed a US income tax return since 2004, even though he earned income of more than US$100,000 in the US from 2005 until 2007.
Court documents obtained by The Straits Times reveal that Mr Hsiaw had met Mr Christos Bagios, a former banker at UBS and Credit Suisse Group who was arrested in 2012 and subsequently pleaded guilty to helping Americans cheat on taxes from 1993 to 2009. Mr Hsiaw had met Mr Bagios in Palo Alto, California, on Feb 20, 2001 to discuss his Swiss account which was opened in 1994, court papers say.
This was after Mr Hsiaw received a warning from UBS about new tax rules that would require the bank to identify account holders having investments with US source income.
About the case
According to records obtained from American citizen Hsiaw Ching-Ye's Swiss account with UBS, its highest balances were US$990,351 in 2001 and US$773,011 in 2002. By 2003, the account had been emptied and closed.
In March 2002, he requested and received a bank cheque for US$600,066 from his Swiss account.
On April 9, 2002, he sent then UBS banker Christos Bagios a fax from the bank's office in Hong Kong, advising that he had opened a new account at the UBS branch in Singapore. He asked that UBS transfer the balance of his Swiss account to his Singapore account. On April 12, 2002, UBS transferred US$194,356 to his Singapore account and closed his Swiss account.
The UBS Swiss records given to the United States Internal Revenue Service (IRS) did not disclose what happened to the US$600,066 that was withdrawn.
When the IRS contacted Mr Hsiaw, he initially denied having any foreign accounts, but later admitted to having the Swiss and Singapore accounts. He allegedly stated that the Singapore account was closed in 2007 and had a balance of US$100,000 at the time.
In September 2012, UBS provided the IRS with a waiver form which, if executed by Mr Hsiaw, would allow UBS to disclose his Singapore account records. The form was mailed to him, but he allegedly did not execute it and later refused to speak to the IRS when contacted, court documents say.
In September 2000, he signed a UBS form stating that he "would like to avoid disclosure of his identity to IRS under the new tax regulations", said the court papers.
Mr Bagios, a Greek citizen who lived in Switzerland, was arrested amid a US crackdown on offshore tax evasion and admitted that he conspired with five Swiss bankers when he worked at Zurich-based UBS, and helped nine clients who did not declare accounts to IRS.
UBS avoided prosecution by paying US$780 million in 2009, admitting it helped Americans cheat on taxes, and turning over data.
In the case relating to Mr Hsiaw, UBS was ordered to attend court in Miami on March 31 to explain why it has refused to provide his Singapore account records from Jan 1, 2001 till Dec 31, 2011 so that IRS can determine his correct federal tax debt from 2006 until 2011.
The bank says it could not comply with IRS' summons because "in the absence of a waiver from Mr Hsiaw, it is prohibited by Singapore's bank secrecy laws from disclosing the bank records that relate... to (his) Singapore account."
IRS disagreed. It said the interest of the US in combating tax evasion through the use of secret foreign bank accounts substantially outweighs the interest of Singapore in preserving the privacy of bank clients.
Among the documents sought are foreign bank records, including foreign brokerage or securities account records of monies deposited in the Singapore account that constitute undeclared income, as well as interest, dividends and capital gains earned in the five tax years.
The Monetary Authority of Singapore has said previously that banking confidentiality cannot be used to shield criminal activities. Singapore is fully prepared to share banking information to assist foreign criminal investigations, within established international cooperation channels for such data sharing.
A country may seek from Singapore mutual legal assistance, including access to bank account information, in the investigation and prosecution of tax crimes and other serious offences, it said previously.