Credit Suisse has once again found itself in hot water. The Swiss bank has been accused of violating a plea agreement reached with American authorities in 2014 by continuing to help wealthy clients evade taxes. The allegations were made in a report released by the Senate Finance Committee, which found that the bank had failed to disclose dozens of secret offshore accounts worth millions of dollars.
Credit Suisse’s plea deal violated for aiding tax evasion
According to the report, Credit Suisse aided tax evasion by clients, including helping a US businessman hide over $220m in offshore accounts from the Internal Revenue Service (IRS). The bank also found 23 accounts each worth over $20m that were not declared to tax authorities. The report found that more than $700m was concealed in violation of the bank’s plea deal with the US Justice Department.
The report also alleges that former senior bankers at Credit Suisse helped manage secret offshore accounts belonging to a family of dual US-Latin American citizens, worth nearly $100m. Bankers at Credit Suisse figured out how to code accounts for Americans who possess dual citizenship, and were incentivized to help accounts hide US ties because their bonuses depend on the amount of money being managed.
UBS acquisition impacted by Senate findings
Credit Suisse’s pending acquisition by UBS may be impacted by the Senate findings, which pose new problems for UBS as it tries to create a single Swiss megabank. Before Credit Suisse’s acquisition by UBS, a new settlement was estimated to cost over $1 billion. However, Credit Suisse’s fall now complicates ongoing discussions for a new settlement with the US Justice Department.
Potential turmoil to banking industry
Some US government officials have expressed concerns that a large settlement could cause fresh turmoil in the banking industry. Senate Finance Committee Chairman Ron Wyden criticized the Justice Department for failing to hold corporate criminals accountable, citing Credit Suisse as an example. The report found that several other Swiss banks could be repeatedly violating similar agreements with the DOJ.
Credit Suisse cooperates with US authorities
Credit Suisse stated that it is conducting an internal investigation to identify accounts that could violate US law. The bank does not tolerate tax evasion and has implemented extensive enhancements since the violations occurred. However, the Senate report alleges that despite internal reviews, a court-appointed monitor, several whistleblower disclosures to the Justice Department, a modernization of systems, and significant sums spent on outside attorneys, Credit Suisse continued to hide millions of American dollars in dozens of offshore accounts.
Consequences for Credit Suisse
An attorney who represents whistleblowers and informants cited in the Senate report said Credit Suisse’s breach of its plea deal means that the Justice Department should insist on collecting at least $1.3 billion from the bank. The DOJ must correct its lax oversight of Credit Suisse, rigorously scrutinize the bank’s compliance with its 2014 plea agreement, and hold Credit Suisse accountable for any violations of its plea agreement according to the Senate report.
Conclusion
It remains to be seen what consequences Credit Suisse will face as a result of these latest allegations. While the bank has stated that it does not tolerate tax evasion and cooperated with US authorities, the evidence presented in the Senate report suggests otherwise. It is clear that banking institutions still need to make significant changes to their systems and culture to prevent similar incidents from happening in the future.
Image Source: Wikimedia Commons
