The tussle between the US and foreign banks over tax evasion allegations against wealthy US citizens has intensified, with authorities reportedly demanding that UK/Hong Kong-listed HSBC reveals names on thousands of account holders.

The tussle between the US and foreign banks over tax evasion allegations against wealthy US citizens has intensified, with authorities reportedly demanding that UK/Hong Kong-listed HSBC reveals names on thousands of account holders.

The US Department of Justice has sought a court order to force HSBC to disclose names of US-based clients banking with HSBC USA and an India affiliate from 2002 to last year, reports said. HSBC had told US officials that there were 9,000 such accounts, which require a minimum balance of $100,000, as of September 2010, according to court papers. For the whole of 2009, the most recent year for which figures are available, paperwork filed with the IRS revealed 1,921 accounts, reports said.

"While we haven't seen the summons, HSBC does not condone tax evasion and fully supports the U.S. efforts to promote appropriate payment of taxes by US. taxpayers. While complying with the law in all the jurisdictions in which it operates, including India, HSBC cooperates with requests from US authorities," HSBC told this publication in an emailed statement.

"We have been engaged in a constructive dialogue with US authorities and hope any "IRS Summons" issues can be resolved expeditiously," it said.

The US has been waging an increasingly determined campaign to clamp down on offshore tax evasion. Until the HSBC case surfaced, the most prominent example focused on the US struggle with Switzerland over the use by US citizens of offshore accounts. The European country’s historic bank secrecy laws were partially weakened when Switzerland and the US agreed that UBS, Switzerland’s largest bank, should transfer some client names to the US relating to a civil case focusing on tax evasion allegations. The bank paid a large fine in February 2009 to settle a separate criminal charge.

Legislators in Congress have passed a number of laws to increase compliance requirements on US citizens, such as on expat citizens via the HIRE Act of last year; it is now proposed by the US Treasury and IRS to impose an information reporting requirement on US banks paying deposit interest to non-resident alien individuals who are residents of any foreign country. That proposal has come under heavy fire from the US banking industry, fearful that it will drive money from the US to other nations.

In the HSBC case, a written statement submitted to the court by Daniel Reeves, the IRS’s senior advisor on offshore compliance, said: “This indicates that thousands of United States taxpayers of Indian origin who maintain more than $100,000 in accounts with HSBC may have failed to disclose their HSBC India accounts to the United States government.”

“It is also likely that those taxpayers may have failed to report income earned on those undisclosed accounts,” the statement said, according to the Financial Times.

The report quoted HSBC as saying that it had not yet seen the court filings, adding that it did not condone tax evasion and fully supported the US government in its effort to collect appropriate taxes.