Credit Suisse on the defensive in US tax probe
CREDIT Suisse’s top bosses defended the bank’s record on tax evasion, claiming they had fought the practices vigorously since 2008, in a hearing yesterday with US senators.
A damning report from the lawmakers found evidence that staff at the Swiss bank had schemed to avoid being caught by the US authorities when helping American clients dodge tax, and when courting new clients.
Senator John McCain said some of the methods used to evade detection – including installing remotely operated elevators and hiding documents in copies of magazines – “belong in a spy novel.”
The investigation found that in 2006 the bank had over 22,000 US customers with Swiss accounts, holding assets of more than SFr12bn (£8.1bn).
The bank said it has now slashed the number of US clients, simply shutting down thousands of accounts immediately and closing thousands more after finding they may not be compliant with US tax law.
It now has 3,500 US accounts with less than SFr7bn in assets under management.
Although 1,800 staff were found to have serviced undeclared US client accounts, the bosses insisted a core of up to 15 staff at any one time was responsible for the worst offending.
Chief executive Brady Dougan, who took the top job in 2008, told the senators his crackdown began when the committee issued a report warning its rival UBS had allowed customers to evade tax.
“Only US clients which establish compliance with US tax laws can become clients of our bank,” Dougan said.
“When US clients left UBS, some Swiss banks welcomed those clients.”
Credit Suisse’s general counsel Romeo Cherutti said this marked a sharp break with the past.
“Once the report came out, within a week we decided we would not take in account holders leaving UBS,” said Cherutti.
“We decided to identify and close US taxpayer accounts that would not or could not prove tax compliance.”
And the bosses added that they would send the US more details of account holders, if the senate approves a new treaty.
Without that treaty the bankers said they would be at risk of prosecution in Switzerland for disclosing the names.
“That is a law in Switzerland, yet you want to do business here? You have to comply with our laws,” said committee chairman senator Carl Levin.
TIMELINE: AMERICA’S SWISS TAX PROBE
JULY 2008: UBS PROBED ON TAXES
Switzerland’s biggest bank UBS probed by the senate committee and admits it had facilitated tax dodging by US clients. It is later fined $780m and gives the US authorities 4,700 names.
2010: DOJ OPENS INVESTIGATIONS
The Department of Justice interviews Swiss banks to look for undeclared accounts.
2011: CREDIT SUISSE INDICTMENTS
Four Swiss bankers indicted by the DoJ in February. Grand Jury issues subpoena for Credit Suisse data in March. By September the Swiss and US governments are working on a formal process on the investigations.
2013: SWISS COURT APPROVES DATA
After two years Swiss courts approve a US request for information and names on Credit Suisse bank accounts.
2014: CREDIT SUISSE AT COMMITTEE
Credit Suisse yesterday admitted it had lax controls in the past but has tightened them up.
KEY LINES FROM THE SENATE’S HEARING INTO CREDIT SUISSE AND US TAX
This is a really disturbing situation. It is another example of a foreign bank succumbing to the charms of compensation over compliance, wilfully undermining US tax and securities laws and taking advantage of Switzerland’s opaque tax regime. [The way] Credit Suisse helped US clients hide [accounts] from US authorities was egregious. [The practices involved] belong in a spy novel.”
SENATOR JOHN MCCAIN
To our deep regret, it is clear that some Swiss-based bankers at Credit Suisse appear to have helped their US clients hide income and assets in the past. Although it was not and is not illegal for Swiss banks to accept deposits from Americans, it is absolutely unacceptable for Swiss-based bankers to help US taxpayers evade taxes or to provide them with securities advice in the US without being properly licensed.”
CREDIT SUISSE CEO BRADY DOUGAN
Before 2008 our bank, like many in Switzerland at the time, had the view that tax compliance was a matter between individual taxpayers and that taxpayer’s government. Looking back, that made the bank vulnerable to abuse by clients who wanted to hide untaxed assets, and preventing clients holding them was not a priority. That was a mistake. Since that time there has been a real and meaningful change.”
GENERAL COUNSEL ROMEO CERUTTI