A US plan to uncover offshore credit card schemes for tax evasion was criticised in Bermuda yesterday.

The Internal Revenue Service programme was branded another example of misconceptions surrounding so-called tax havens.

"There could be a million and one legitimate reasons for a US resident to have a personal Bermuda credit card, for example," said Bob Stewart, a former chief executive of Shell Bermuda and a local advocate of freedoms of the individual.

He described it as a "fallacy", that a US citizen or resident of the United States could arouse suspicion simply by virtue of possessing a credit card issued through an offshore bank.

Bermuda's banks believed the move would not affect the Island.

On Monday the IRS offered a limited amnesty programme to taxpayers who have avoided US taxes through the use of a credit card issued by an offshore bank.

Up until April 15, offenders can avoid serious legal penalties, so long as offenders "dish the dirt" on tax advisors who promoted or solicited the offshore arrangement.

They will also be required to pay back any taxes and interest.

The move is a follow up on the IRS investigation launched in October 2000 which used so-called "John Doe" summonses to ask for information on credit and charge card holders from the card companies American Express and Mastercard.

The agency confirmed last year that Bermuda was not one of the jurisdictions being investigated and named Caribbean countries such as Antigua Barbuda, the Cayman islands and the Bahamas, as countries which might arouse the agency's interest.

Sen. Max Baucus, the ranking Democrat on the Senate Finance Committee, praised the programme, saying, "I applaud the IRS for today's initiative that will help to restore public confidence and eliminate the illegal practice of avoidance through offshore tax shelter schemes."

Bermuda's two main banks reacted yesterday by saying that the amnesty would have no impact on Bermuda.

Both the Bank of Butterfield and the Bank of Bermuda said that their due diligence processes for credit card applications were designed to preclude customers with improper motives.

Richard Ferrett, chief financial officer for the Bank of Butterfield, said: "We follow the same criteria for establishing credit card accounts as we do for any other accounts.

"When opening an account, we establish the identity of the account holder and the reason for wanting an account.

"If there are no valid reasons for having an account, then we will reject the application.

Where we do open an account, all customers are asked to confirm that they will comply with all tax reporting requirements imposed upon them in any jurisdiction."

Ifor Hughes, head of compliance for the Bank of Bermuda, said: "First and foremost, we obviously don't welcome and are not interested in having clients who have improper motives or would seek to utilise the bank's facilities for improper ends. Clearly we have Know Your Customer and due diligence reviews that would take place before we establish any new relationship, whether that relationship is in relation to a credit card or any other bank product.

When we do our Know Your Customer and due diligence reviews, those are to establish identity but also background particulars.

We also have a suspicious transaction reporting regime, within that regime in which fiscal offences are included."

The IRS itself appeared to be downplaying the significance of the investigation yesterday.

The agency had originally alleged that over 1 million cardholders could be involved in using the cards to evade taxes, but now it has revised down that estimate.

The agency said it has identified "thousands" of taxpayers for possible examination and that use of credit and charge cards to avoid taxes involved "a substantial number" of taxpayers.