Federal prosecutors are ramping up their criminal investigation into HSBC concerning its sale of offshore tax services to wealthy Americans suspected of evading taxes, according to two people briefed on the matter and to court papers.
At least two American clients of HSBC, which is based in London, are aiding federal prosecutors by turning over account details, names of bankers and internal memorandums and other confidential documents regarding HSBC’s offshore private bank, according to one person briefed on the matter. He spoke on the condition of anonymity because of the continuing investigation.
HSBC, however, has not received a target letter from prosecutors indicating that a grand jury has been convened to investigate it, according to another person briefed on the matter. That would be the first step toward an indictment.
The investigation of the bank, which is being conducted by the Justice Department, began informally around late 2008 as an offshoot of the scrutiny of UBS, the Swiss bank giant, over offshore services used to aid tax evasion.
One of the people briefed on the investigation said the Justice Department “is looking for UBS-style numbers and UBS-style fact patterns, to see if there’s a UBS-style situation of a bank actively marketing” tax evasion services in the United States.
Juanita Gutierrez, a spokeswoman for HSBC in New York, declined to comment on the investigation, but said, “HSBC does not condone tax evasion.”
Special agents from the Internal Revenue Service have paid surprise visits in recent weeks to at least two American clients of HSBC whom the authorities suspect of tax evasion. Holding an offshore account is not illegal, but clients must declare the income to the I.R.S.
On a related front, the Justice Department mailed letters late last month to several HSBC clients informing them that they faced possible criminal charges for evading taxes through the bank, in part through its affiliates in India, according to a lawyer whose client received a letter. The letters told the clients that they were subjects of a criminal investigation, which is one step below a target.
HSBC has turned over to prosecutors evidence regarding the accounts of at least two prominent clients, including written documents and, unusually, recordings of dozens of conversations between the clients and their bankers. Several former clients are cooperating, including those already indicted and some who have come forward voluntarily.
Prosecutors are also mining suspicious activity reports filed by HSBC. The reports, which financial institutions are required to file with the Financial Crimes Enforcement Network, a unit of the Treasury Department, concern suspicious or potentially suspicious activity by clients.
A Justice Department spokeswoman declined to comment on Friday.
In April, the authorities arrested and charged two wealthy HSBC clients, Mauricio Cohen Assor and his son, Leon Cohen-Levy, both property developers, with evading taxes through the bank’s offshore division. The case is set to go to trial in September.
In February, a wealthy Virginia doctor, Andrew B. Silva, pleaded guilty to evading taxes through the offshore division of HSBC, according to court papers in his case. Dr. Silva came to the attention of the authorities when he was randomly caught carrying cash into Newark Liberty International Airport.
In part, the authorities want to know whether HSBC, which shut down its offshore private banking services during the investigation into UBS, illegally advised clients to funnel their money to other banks or take large cash withdrawals and sneak the money into the United States, said one of the people briefed on the investigation.
In the case involving Mr. Cohen Assor and Mr. Cohen-Levy, HSBC has turned over to prosecutors recordings of dozens of conversations between Mr. Cohen Assor and his bankers, some or all of them in 2007. Prosecutors are using the recordings to determine how high any wrongdoing might have gone up the chain at HSBC. At least one HSBC banker has given a deposition to prosecutors, according to court papers.
“If you look at the Cohen matter,” said a person briefed on the matter, “you could deduce that HSBC seems to be cooperating with the government.”
UBS paid a $780 million fine last year and admitted criminal wrongdoing in connection with offshore services sold to wealthy Americans through its private bank that allowed them to evade billions of dollars in taxes. Last month, the Swiss Parliament approved a final deal to hand over to the I.R.S. the details of 4,450 accounts used by wealthy Americans suspected of evading taxes.
While UBS staunchly defended Swiss bank secrecy laws while under scrutiny, HSBC, which has large Swiss operations, has been quiet on the matter.