American Express Co. agreed Monday to turn over to U.S. tax authorities information on offshore accounts held by Americans suspected of evading taxes, the second major card company to do so after MasterCard International Inc.
As part of a widening investigation of tax evasion, the Justice Department asked a federal court in San Francisco to have Visa International Inc., the biggest international card brand, disclose offshore credit card accounts.
"Simply put, the guarantee of secrecy associated with offshore banking is evaporating," Internal Revenue Service Commissioner Charles Rossotti said.
The IRS, in trying to detect unreported income and prosecute people who are failing to file tax returns, is pursuing a form of tax evasion that uses credit cards issued by offshore banks.
Former IRS Commissioner Don Alexander, a tax lawyer with Akin, Gump, Strauss, Hauer & Feld in Washington, said the American Express agreement may lead to dozens of criminal probes, probably resulting in fines, other penalties and jail time.
"Some good criminal cases will scare the daylights out of people," Alexander said.
MasterCard, the second-biggest card brand, has produced more than 1.7 million records involving more than 230,000 accounts in response to the government's request, the Justice Department said.
IRS officials have estimated they'll find 1 million to 2 million Americans who have offshore credit card and bank accounts. The agency is beginning to audit cases involving MasterCard customers. Some of those will be referred for criminal investigation.
A settlement agreement between the government and American Express, filed in federal court in Miami, allows the tax agency to collect identifying information, such as passport and driver's license numbers, of customers with accounts in Antigua, Barbuda, Bahamas and the Cayman Islands. The IRS is looking for records showing charges greater than $2,500 for purchases of cars, boats, hotels or travel services in the U.S.
American Express spokeswoman Susan Korchak said the fourth-largest U.S. card issuer will notify affected cardholders in writing and will provide the information within 30 days of the order.
The agreements with American Express and MasterCard may help deter the use of offshore accounts to avoid U.S. taxes, IRS officials said.
Visa spokeswoman Cheryl Heinonen said the company hadn't received any information requests from the IRS.