The fallout from years of investigations into Swiss banking practices yielded another win for the Department of Justice: Credit Suisse AG was sentenced today for conspiring to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS). The punishment? U.S. District Chief Judge Rebecca Beach Smith ordered the bank to pay approximately $1.8 billion dollars to the United States by November 28 in accordance with the plea agreement.
The plea agreement, reached in May of 2014, called for Credit Suisse to pay out a total of $2.6 billion. Of that, $1.8 billion will be paid to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services. Credit Suisse has already paid $196 million to the Securities and Exchange Commission (SEC) for violating federal securities laws.
At the time of the plea, then Attorney General Eric Holder Jr., remarked in response to ramped up prosecutions, that no bank "is too big to jail." In addition to the plea, investigations into Credit Suisse's practices have resulted in indictments of seven Credit Suisse employees, the owner of a trust company and a number of the bank's U.S. clients.
Today's announcement was made by Deputy Attorney General James M. Cole, Acting Deputy Assistant Attorney General Larry J. Wszalek for the Justice Department's Tax Division, U.S. Attorney Dana J. Boente for the Eastern District of Virginia and IRS Commissioner John Koskinen. Commissioner Koskinen said, about the sentencing,
Today's sentencing is yet another striking example of what happens to those who help offshore tax evaders. We owe it to the vast majority of honest U.S. taxpayers to tirelessly search for and prosecute those who dodge paying their fair share and the unprincipled professionals who assist them.
It certainly appears that the U.S. isn't slowing down its investigations. As part of the plea agreement, Credit Suisse has agreed to make a complete disclosure of its cross-border activities, cooperate in treaty requests for account information, provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed and to close accounts of account holders who fail to come into compliance with U.S. reporting obligations. That could mean unhappy disclosures for U.S. taxpayers who have not yet come forward - despite a number of programs in recent years which have afforded them the opportunity to do so.
It could also get worse for the bank. Under the agreement, Credit Suisse may not challenge the restitution amount, which can also provide a basis for an IRS civil tax assessment (read: there may still be more to come).
Earlier this year, Credit Suisse claimed that it was business as usual but it has to be rethinking how it markets to and conducts business with U.S. taxpayers. In 2009, Wegelin & Co., Switzerland’s then oldest bank remained defiant in the face of investigations into its business practices, instead recommending that clients" exit from all direct investments in US securities…" Four years later, however, the bank sang a different tune: after the bank was indicted, it was eventually forced out of business.
Credit Suisse, like UBS, has so far survived the crackdowns and the new Foreign Account Tax Compliance Act (FATCA) requirements. That doesn't mean, however, that things aren't changing. The much-touted Swiss banking privacy laws are showing cracks and investigations into Swiss banks and their U.S. clients are ongoing.
