Credit Suisse receives staggering penalty for guilty plea

Thursday, 22 May 2014
Credit Suisse has ended its prolonged dispute with the US Department of Justice (USDoJ) by pleading guilty to 'an extensive and wide-ranging conspiracy' to help its American clients evade their taxes.

The bank was forced to pay a penalty of USD2.6 billion, the largest financial penalty ever imposed in a US criminal tax case.

The agreement allows the legal disputes to be resolved without a formal criminal prosecution, and is binding on both parties. Moreover, the US government will not withdraw Credit Suisse's US banking licence – the main threat it deployed to force the bank to come to a settlement.

The enforced guilty plea and associated penalty – far higher than the USD 780 million paid by UBS in 2009 – appears to be a result of Credit Suisse's refusal to follow UBS in disclosing the names of its thousands of US clients to the USDoJ.

However, the bank will still have to disclose significant information about its US accounts. This includes information on how its cross-border business operated; how it attracted and serviced its account holders; and the total number of accounts held by US persons, along with their maximum values and the funds were transferred into and out of the account. It must also disclose the number of US taxpayers linked to each account and whether the account was held by an individual or entity.

It will also have to hand-over the names of all financial and legal advisors associated with each account.

The USDoJ will use this information to make treaty requests to the Swiss government for actual account records, and so track down the names of the accountholders.

'For those account holders who closed their accounts knowing that our investigations were focusing on Credit Suisse, we are obtaining information that is enabling us to follow the funds to other Swiss banks or to banks in other tax haven and bank secrecy countries,' commented Assistant Attorney-General Kathryn Keneally.

The department alleged that Credit Suisse had 22,000 US client accounts, worth a total of USD10 billion, although that figure includes both declared and undeclared accounts. One wholly-owned subsidiary began using sham entities to conceal US funds more than a century ago, according to US Attorney-General Eric Holder. Since 2011, the USDoJ has brought criminal charges against eight of the bank's employees, two of whom have so far pleaded guilty.

Credit Suisse has already made some financial provision in its accounts to deal with the expected penalties. But the size of the fine means it will now have to take an extra CHF1.6 billion (USD1.8 billion) charge.

• The USDoJ stressed that its offshore enforcement programme is not limited to Swiss banks, but extends to India, Israel, Luxembourg, the Cayman Islands, several other Caribbean countries and several locations around the world that are not yet public.

Sources

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