Last week's US Federal Court decision to allow the Internal Revenue Service to ask for MasterCard credit card records issued by offshore banks will have little effect on Bermuda's banks, according to a local bank official.

Following the decision in a Miami Court and responding to questions posed by The Royal Gazette, senior vice president, banking for the Bank of Butterfield, Lloyd Wiggan said the decision will have "very little" impact.

Mr. Wiggan said: "Bank of Butterfield is a Bermuda-based community bank that issues credit and debit cards to Bermudian customers and other nationals resident in Bermuda.

"We have a tiny handful of cardholders with US addresses but the majority of these are Bermudians studying or on secondment overseas or who have some other connection with Bermuda."

Mr. Wiggan also said he felt the ruling would have little impact on the Island's other banks due to Bermuda's long standing exchange of information agreement with the US and said: "Community banks, like Bank of Butterfield, that are servicing local clientele will not be impacted.

"Bermuda has had an exchange of information agreement with the USA on tax matters since 1986, so the IRS already has the means to obtain information from Bermuda banks regarding suspected US tax evaders."

Mr. Wiggan also said the exchange of information agreement would only likely take effect following investigation of subpoenaed information from MasterCard.

He said: "We do not know how MasterCard will respond to any subpoena is receives, but we believe it will be just MasterCard who is subpoenaed in respect of MasterCard records.

"Depending on what the IRS finds as a result of that subpoena, other subpoenas may be issued to banks operating inside the United States or requests made of foreign banks domiciled in countries which have tax exchange of information agreements with the United States."

Mr. Wiggan also said he was not aware of whether Visa have had to comply with a similar process but he did not think they had.

The Miami federal court ruling allowed the IRS to ask MasterCard International for records of offshore credit cards issued by banks in 30 countries including Bermuda, the Cayman Islands, St. Kitts and Nevis, Belize, Liechtenstein and Switzerland, according to a news release from the Department of Justice.

The IRS suspects US citizens have been evading taxes by diverting income and assets overseas and spending the money in the US by using credit, charge or debit cards issued by banks in offshore tax havens or jurisdictions offering financial privacy.

The so-called "John Doe" summons would seek transaction records for MasterCard credit cards issued by banks in 30 countries that were used in the United States at least twice between January 1999 and December 2001, MasterCard said when the Justice Department sought the authorisation last week.

"Because of the scope of the IRS request, we will need to work with them to determine how best to comply in a manner consistent with US law, but which recognises the legitimate privacy concerns of our members and their customers in the countries identified in the request," MasterCard said in a news release last week.

Last week, a spokeswoman for the Bank of Bermuda, the Island's largest credit card issuer, said MasterCard does not keep detailed customer records.

Instead, they reside on the computers of the banks which issue the cards and if the IRS wanted access to the Bank's records, they would have to subpoena for them in Bermuda courts.

The spokeswoman said client confidentiality issues prevented the bank from giving out transaction records, even if MasterCard told the bank it had to.

While it is not illegal to have an offshore credit card account, using the cards to access foreign bank accounts for which income is not reported in the United States is illegal.

The IRS has estimated there could be between 1 million and 2 million US citizens with debit/credit cards issued by offshore banks.

That would be well above the 117,000 individual taxpayers who indicated they had offshore bank accounts in the 1999 tax year.