Credit Suisse violated a plea agreement with US authorities by failing to disclose secret offshore accounts wealthy Americans used to avoid paying taxes, US lawmakers said, publishing a two-year investigation detailing the role Swiss bank employees in conflict had to help tax evasion by customers.
On Wednesday, the US Senate Finance Committee pointed to an ongoing, possibly criminal, conspiracy linked to nearly $100 million in accounts belonging to a family of US taxpayers that the bank did not disclose. He also said that Credit Suisse helped an American businessman hide more than $220 million in offshore accounts from the Internal Revenue Service.
Credit Suisse disclosed that it had found 23 accounts each worth more than $20 million that were unreported to tax authorities, many of them disclosed only days before the report was published, according to the committee. He said his findings show more than $700 million was hidden in violation of the bank’s nine-year plea agreement with the US Department of Justice.
“Credit Suisse got a discount on the penalty it faced in 2014 for allowing tax evasion because bank executives swore they would get out of the business of defrauding the United States,” said Sen. Ron Wyden, the Democratic chairman of the committee. .
“This investigation shows that Credit Suisse failed to deliver on that promise, and the pending acquisition of the bank does not wipe the slate clean,” he said.
The Swiss government lobbied for a $3.25bn acquisition of long-troubled Credit Suisse by rival bank UBS this month amid turmoil in the global financial system. He collapse of two US banks it ignited broader fears that sent shares of Switzerland’s second-largest bank tumbling as customers withdrew their money.
The Senate findings raise new problems for UBS as it tries to absorb Credit Suisse and create a single Swiss megabank, on the same day that UBS appointed a new chief executive to help push through the acquisition. It is also Credit Suisse’s latest confrontation with US authorities, following deals worth hundreds of millions of dollars in mortgage-backed securities that were behind the 2008 financial crisis.
Credit Suisse, whose years-long woes range from hedge fund losses to fines for failing to prevent money laundering by a Bulgarian cocaine ring, said it “does not tolerate tax evasion” and insisted the Senate report described “legacy issues”, some dating back a decade, that have been addressed ever since.
“We have implemented extensive improvements since then to root out people seeking to hide assets from tax authorities,” the Zurich-based bank said.
“Our clear policy is to close unreported accounts when identified and to discipline any employee who fails to comply with bank policy or meet Credit Suisse standards of conduct,” he said.
UBS said it has assessed the pending lawsuits and investigations as part of the Credit Suisse acquisition and expects the deal to be beneficial to shareholders. It is working to close the sale and gain regulatory approval in the coming weeks or months.
The Senate report highlighted Credit Suisse’s cooperation with the investigation, including the appointment of new leadership.
‘knowingly and deliberately’
The Swiss lender paid a discounted $1.3 billion fine to the US Department of Justice after pleading guilty in 2014 to conspiring to help US taxpayers file false income tax returns and other documents with the IRS.
The bank acknowledged having “knowingly and deliberately” helped thousands of Americans to open accounts that were not declared to tax authorities and hide assets abroad. He avoided criminal charges in exchange for agreeing to report undisclosed accounts and provide other information to US officials.
The Senate committee said secret offshore accounts belonging to a family of US and Latin American citizens worth nearly $100 million were closed in 2013, but the money was transferred to other banks without informing US authorities.
With that move, “Credit Suisse allowed what appears to be potentially criminal tax evasion by a client to go undetected for nearly a decade,” the report says.
The committee said former senior bankers helped manage that family’s accounts. In addition, Credit Suisse employees helped an American businessman hide $220 million from US authorities despite long-knowing he was American, according to the report, which says whistleblowers flagged the scheme after the deal culpability.
Credit Suisse workers were given incentives to help accounts hide ties to the United States because their bonuses depend on how much money is managed, according to the report. To that end, employees who had clients with assets greater than $20 million or $30 million could have given those accounts special consideration because it would mean they would get larger bonuses, the committee said.
Investigators say bankers figured out how to encrypt accounts for Americans with dual citizenship. Those bankers would use the non-US passports of wealthy people to circumvent internal systems designed to look for identifying marks in US passports.
Lawmakers on the committee became aware of 13 of the 23 potentially unreported accounts worth more than $20 million just days before releasing their report. That raises concerns that Credit Suisse is still disclosing hundreds of millions of dollars in large unreported accounts belonging to ultra-rich Americans years after signing the plea agreement and facing additional scrutiny, the committee said.
