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Caribbean banks warned after record $2.6 billion penalty on Swiss bank
Published on May 21, 2014 Email To Friend    Print Version


WASHINGTON, USA -- In a case described as a warning to all foreign banks, including those in the Caribbean, Credit Suisse pleaded guilty on Monday to conspiracy to aid and assist US taxpayers in filing false income tax returns and other documents with the Internal Revenue Service (IRS) and has agreed to pay $2.6 billion, the highest ever penalty in a criminal tax case investigation

The guilty plea by the Swiss bank is the result of a years-long investigation by US law enforcement authorities that has also produced indictments of eight Credit Suisse executives since 2011; two of those individuals have pleaded guilty so far.

The plea agreement, along with agreements made with state and federal partners, provides that Credit Suisse will pay $1.8 billion to the Department of Justice for the US Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services -- a total of $2.6 billion.

Earlier this year, Credit Suisse paid approximately $196 million in disgorgement, interest and penalties to the Securities and Exchange Commission (SEC) for violating the federal securities laws by providing cross-border brokerage and investment advisory services to US clients without first registering with the SEC. That settlement with the SEC is also reflected in Monday’s plea agreement.

“This case shows that no financial institution, no matter its size or global reach, is above the law,” said Attorney General Eric Holder. “Credit Suisse conspired to help US citizens hide assets in offshore accounts in order to evade paying taxes. When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here.”

As part of the plea agreement, Credit Suisse acknowledged that, for decades prior to and through 2009, it operated an illegal cross-border banking business that knowingly and willfully aided and assisted thousands of US clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.

“Credit Suisse’s guilty plea is just the latest effort by the department to slam the door shut on undeclared bank accounts, phony trusts and other foreign schemes used by US taxpayers to evade taxes,” said Deputy Attorney General James Cole. “We have taken public actions in ... the Cayman Islands and several other Caribbean countries. And we are engaged in law enforcement actions around the world that are not yet public.”

According to the statement of facts filed with the plea agreement, Credit Suisse employed a variety of means to assist US clients in concealing their undeclared accounts, including by:

• assisting clients in using sham entities to hide undeclared accounts;

• soliciting IRS forms that falsely stated, under penalties of perjury, that the sham entities were the beneficial owners of the assets in the accounts;

• failing to maintain in the United States records related to the accounts;

• destroying account records sent to the United States for client review;

• using Credit Suisse managers and employees as unregistered investment advisors on undeclared accounts;

• facilitating withdrawals of funds from the undeclared accounts by either providing hand-delivered cash in the United States or using Credit Suisse’s correspondent bank accounts in the United States;

• structuring transfers of funds to evade currency transaction reporting requirements; and

• providing offshore credit and debit cards to repatriate funds in the undeclared accounts.

As part of the plea agreement, Credit Suisse further 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 US reporting obligations. Credit Suisse has also agreed to implement programs to ensure its compliance with US laws, including its reporting obligations under the Foreign Account Tax Compliance Act and relevant tax treaties, in all its current and future dealings with US customers.

“Today’s plea by Credit Suisse is a significant step in our global enforcement against those who would avoid their tax obligations by hiding their assets in foreign bank accounts, and those financial institutions, bankers, and other professionals who facilitate this conduct,” said Assistant Attorney General Kathryn Keneally for the Tax Division. “Credit Suisse has also changed its business operations to ensure that US taxpayers will no longer be able to hide their assets at Credit Suisse, and provided the government with valuable information that will further our investigations.”

“This prosecution and plea should serve notice that secret accounts and assisting the evasion of income taxes has a high cost,” said US Attorney Dana Boente. “Concealing financial accounts from the US government is not a legitimate part of wealth management or private banking services.”

“Pursuing international tax evasion is a priority area for IRS Criminal Investigation, and we will continue to follow the money here in the United States and around the world” said IRS Commissioner John Koskinen. “I want to commend the special agents in IRS-Criminal Investigation for all of their hard work in this area and the close cooperation with the Department of Justice. Today's guilty plea is another important milestone in ongoing law enforcement efforts to investigate the use of offshore accounts to evade taxes. People should no longer feel comfortable hiding their assets and income from the IRS.”

The Board of Governors of the Federal Reserve System also announced on Monday that it has reached a resolution with Credit Suisse, by which Credit Suisse has agreed to a cease and desist order, certain remedial steps to ensure its compliance with US law in its ongoing operations, and a civil monetary penalty of $100 million. Additionally, the New York State Department of Financial Services announced a similar resolution by which Credit Suisse has agreed to a cease and desist order and a monetary penalty of $715 million.

On February 23, 2011, a grand jury in the Eastern District of Virginia returned an indictment charging four Credit Suisse employees -- Marco Parenti Adami, a former Credit Suisse manager; Emanuel Agustino, a former Credit Suisse banker; Michele Bergantino. a former Credit Suisse banker; and Roger Schaerer, Credit Suisse’s former representative officer in its representative office in New York -- with conspiring with other Swiss bankers and US taxpayers to defraud the United States.

On July 21, 2011, the grand jury returned a superseding indictment adding four additional defendants charged with the conspiracy to defraud the United States. The four new defendants were: Markus Walder, the former head of North America Offshore Banking at Credit Suisse; Süsanne D. Rüegg Meier, a former Credit Suisse manager; Andreas Bachmann, a former banker at Credit Suisse Fides, a subsidiary of Credit Suisse; and Josef Dörig, a former Credit Suisse Fides employee and owner/operator of a trust company.

On March 12, 2014, Bachmann pleaded guilty to the superseding indictment in connection with his work as a banker at Credit Suisse Fides. On April 30, 2014, Dörig pleaded guilty to conspiring to defraud the IRS in connection with his role managing offshore entities used by US taxpayers to conceal their accounts at Credit Suisse. Those pleas were accepted by US District Judge Gerald Bruce Lee. Bachmann and Dörig each face maximum penalties of five years in prison when they are sentenced on August 8, 2014.
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