Swiss investment bank Credit Suisse has helped American families hide at least $700 million from tax authorities over the past nine years in violation of a plea agreement with regulators, Senate investigators said Wednesday.
Credit Suisse, which was acquired earlier this month by rival Swiss financial institution UBS with the assistance of the nation’s central bank, pleaded guilty in 2014 to helping thousands of wealthy Americans evade their taxes. Staff members of the Senate Finance Committee announced the conclusion of a two-year investigation into Credit Suisse on Wednesday, which found that the firm has since allegedly concealed more than $700 million on behalf of two dozen American households in violation of the plea agreement.
“Credit Suisse got a discount on the penalty it faced in 2014 for enabling tax evasion because bank executives swore up and down they’d get out of the business of defrauding the United States. This investigation shows Credit Suisse did not make good on that promise, and the bank’s pending acquisition does not wipe the slate clean,” Senate Finance Committee Chairman Ron Wyden (D-OR) said in a statement. “In addition to a significant penalty for the bank, the individual bankers involved in these schemes must also face criminal investigation.”
Executives from Credit Suisse allegedly helped a family composed of Latin American and U.S. nationals transfer nearly $100 million to financial institutions in Switzerland and other countries without notifying the Justice Department. The alleged scheme may produce the largest penalties in history related to Foreign Bank Account Report mandates, which are provisions of the Bank Secrecy Act that require American citizens and residents to disclose large balances in financial accounts outside of the U.S.
Former senior officials at Credit Suisse, including Alexander Siegenthaler, the former head of the company’s private banking division in Latin America, were allegedly directly involved in managing the family’s account. Credit Suisse employees also knowingly helped Dan Horsky, a former business school professor who amassed a $220 million fortune in overseas accounts and was sentenced to seven months in prison.
Two former bankers with Credit Suisse who are presently aiding the Justice Department as whistleblowers detailed the company’s culture in exclusive interviews with CNBC.
“You’re under tremendous pressure to bring in these net new assets, which ultimately translate into revenue,” one whistleblower said. “And that’s the reason for the fraud. You don’t want to lose assets. So, what you do is you try to maintain them in any way, shape, or form.”
The whistleblower contended that the Swiss financial sector survives on the basis of secrecy for their clients. “Swiss banks are much more expensive, and there’s a reason for that,” he continued. “If you could choose anywhere in the world you want to be, why would you pay more? Why would you be in a place which underperforms in terms of your return on assets?”
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Credit Suisse, formerly the eighth largest investment bank in the world, had identified several “material weaknesses” with respect to risk assessment strategy in a recent annual report. Customers of Credit Suisse withdrew $119 billion in the fourth quarter of last year amid risk and compliance failures.
UBS purchased Credit Suisse earlier this month in a $3 billion deal assisted by a public liquidity backstop from the Swiss National Bank worth $108 billion, and nearly $10 billion in government guarantees of potential excess losses. The deal will create tax liabilities of $13,500 for each of the 8.7 million men, women, and children in Switzerland, equivalent to $29,700 per household or 20% of a typical citizen’s annual income.