August 23, 2017

Credi Suisse Latest in Agreeing to Turn Over Information

Credit Suisse resolved its IRS investigation regarding certain banking practices that occurred with respect to U.S. taxpayers. The Credit Suisse resolution follows the IRS resolution with UBS and closure of Wegelin & Co., Switzerland’s oldest private bank, after its U.S. criminal indictment.

In response to a criminal information filed by the Justice Department, Credit Suisse pleaded guilty to aiding and assisting U.S. taxpayers in filing false income tax returns and other documents with the IRS. The total settlement package was around $2.6 billion dollars. Attorney General Eric Holder stated that, “this case shows that no financial institution, no matter its size or global reach, is above the law.” He also stressed the importance of close interagency cooperation in the probe of Credit Suisse and the resulting agreement. Terms of the agreement with the Justice Department do not require Credit Suisse to provide the names of Americans whose accounts may have been involved in tax evasion. However, it appears that Justice will have another vehicle for obtaining many of those names. “Through the information that Credit Suisse has agreed to provide, the Internal Revenue Service and the Department of Justice will be able to make treaty requests to Switzerland for account records,” said Kathryn Keneally, assistant attorney general for the Justice Department Tax Division. “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,” she added.

Swiss Finance Minister Eveline Widmer-Schlump added on May 20 she assumes that solutions for the multiple other Swiss banks under investigation are likely to be found this year now that the Credit Suisse situation has been resolved. A Justice Department program, discussed below, should resolve IRS issues for a number for Swiss financial institutions; however, some of the larger Swiss institutions under investigations, were not eligible to participate and hence resolution of their investigations needs to occur under a customized agreement with the Justice Department after negotiations have concluded. The IRS for its part is now scrutinizing banks outside of Switzerland, including Liechtenstein, India, Israel and other countries.