explored is naming foreign banks as nominal defendants rather than as witnesses in a case
brought by the Securities and Exchange Commission.109
Under Internal Revenue Service Code Section 7602 the IRS has the power to issue
summonses in tax related investigation. Section 7602 says, “the district court for the
district in which…the summoned person resides or may be found shall have jurisdiction
by appropriate process to compel attendance, testimony or production of books, papers or
other data.”110 Evidence of the success of the use of such methods can be seen in the case
of Switzerland which reportedly in response to strong pressure from the United States
capitulated in enacting laws which made insider trading a crime that is subject to
imprisonment upon conviction plus a fine.111
Hence, at present, the authorities in tax investigations involving offshore jurisdictions
that have extensive bank secrecy laws face three main issues.
The US authorities’ ability to reach records and the effect of bank secrecy laws in thwarting these efforts.
The ability of a foreign trustee to refuse to disclose or exchange information to US authorities based on the lack of competent jurisdiction or the lack of proper legal service of process.
109 110 111 112
International Tax and Estate Planning Robert C. Lawrence III 1989 page 510 26 U.S.C. (1954 I.R.C.) Section 7602 (b) International Tax and Estate Planning Robert C. Lawrence III 1989 Practicing Law Institute Supra note 20 at page 510