Frost Law
On May 19, 2014, Credit Suisse, the second-largest bank in Switzerland, pleaded guilty to the criminal charge of conspiracy to aid and assist United States taxpayers in filing false income tax returns. Credit Suisse admits to facilitating tax evasion by wealthy U.S. taxpayers for decades leading up to the 2009 criminal investigation. The bank even (allegedly) had its own branch and private elevator in the Zurich airport, whereby U.S. clients could quickly do their banking before heading out to enjoy their stay in the Swiss Alps. Swiss bank accounts have become synonymous with overseas tax evasion, and the largest Swiss bank, UBS AG, has already paid the price for this notoriety. Criminal investigations of Swiss banks have been ongoing for years, and in 2009 UBS AG pleaded guilty to similar charges. The plea bargain? $780 million and the production of U.S. account holders’ information.
Credit Suisse’s plea bargain was much higher – $2.6 billion – but they somehow negotiated out of providing U.S. account holder information. Swiss secrecy laws protect client information, but the U.S. got around those laws in its 2009 arrangement with UBS AG. Credit Suisse’s refusal to produce this information should provide some solace to its wealthy U.S. patrons who had been using its tax evasion services in the 80s through today. Current account holders should not be lulled into a false sense of security, however, because FATCA (Foreign Account Tax Compliance Act) is looming right around the corner. Switzerland has signed a Model 2 Intergovernmental Agreement with the United States, requiring Swiss financial instutions to report U.S. account holder information to the IRS beginning in 2015. If you are a U.S. person with a Credit Suisse account, be forewarned that Credit Suisse will be providing your account information to the IRS imminently.
The good news for you Credit Suisse account-holders and investors is that this guilty plea has had virtually zero negative impact on the bank itself. Its stocks and business in general have remained consistent since the May 19 guilty plea and the U.S. has ensured that the bank will continue to do business in our country. The U.S. has traditionally refused to prosecute these large banks for fear of the negative repercussions – e.g. the bank could go out of business – but the attorney general sidestepped this issue by having U.S. banking regulators agree to not pull the bank’s licenses to do business in the U.S. One such regulator who has not yet agreed is the Department of Labor, but seeing as how they made an exception for UBS AG and every other large bank who has requested it, it seems like a safe bet that Credit Suisse will be all set to do all U.S. business within the month.
If you’re thinking that the $2.6 billion in penalties doesn’t seem like that great of a victory anymore, keep in mind that the U.S. was not even prosecuting these banks before. Now, the country has received a large portion of lost tax revenue that those Credit Suisse accounts were hiding.
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