SWITZERLAND’S SECOND LARGEST bank, Credit Suisse, accused by Washington of helping US clients hide billions from the taxman, acknowledged today that there had been “misconduct” by some of its employees – but said management was unaware.
“Credit Suisse acknowledges that misconduct, centred on a small group of Swiss-based private bankers, previously occurred at our bank,” it said in a statement submitted to the US Senate, insisting that the bank management had been unaware of the misdeeds.
The document included the statement Credit Suisse chief Brady Dougan was set to give before a US Senate panel later today, a day after a scathing Senate inquiry showed his bank had used elaborate measures to help some 19,000 wealthy US clients evade taxes.
“We deeply regret that, despite the industry-leading compliance measure we have put in place, before 2009, some Credit Suisse private bankers appear to have violated US law,” the statement said, citing a “broad and deep” independent investigation commissioned by the bank.
The internal probe “found no evidence that Credit Suisse’s executive management was aware of these problems,” it said, adding though that “we accept responsibility for and deeply regret these employees’ actions”.
Investigation
The US Senate report, based on a two-year investigation, maintained yesterday that Credit Suisse had “nearly 19,000 US customers with hidden Swiss assets totalling nearly $5 billion” (€3.6 billion) as of 2006.
That figure represents some 85 per cent of the bank’s more than 22,000 US customers in 2006 with Swiss accounts whose assets, at their highest, exceeded $13.5 billion, the report said.
That amount is more than “twice as much as what was said so far,” Douglas Hornung, a Swiss business lawyer specialised on the banking sector, told AFP, speculating that Credit Suisse would face a US fine of around $2.0 billion (€1.4 billion) for its misdeeds.
The final amount will likely not be known for months, but it will probably tower far above the $196-million fine Credit Suisse was slapped with last week by US regulators for providing unregistered brokerage and investment advisory services to US clients, he said.
Ramping up the pressure
Senator Carl Levin, chairman of the Senate subcommittee that led the investigation, took a combative tone earlier this week.
“It’s time to ramp up the collection of taxes due from tax evaders on the billions of dollars hidden offshore,” he told the hearing on Monday.
Among the bank’s cloak-and-dagger practices revealed in the Senate report, Swiss bankers were sent to the United States to secretly find clients, leaving no paper trail, at events sponsored by the bank — such as at golf tournaments in Florida.
Levin cited testimony from former Credit Suisse clients about being taken to meetings in Zurich on a secret, buttonless elevator controlled remotely, and receiving secret bank statements hidden inside magazines.
Dougan, a 55-year-old US citizen, was scheduled to meet before the Senate panel Wednesday along side Hans-Ulrich Meister, who heads the private banking division at Credit Suisse, Robert Shafir, in charge of the bank’s US business and chief council Romeo Cerutti.
In 2008, according to the Senate report, there were more than 1,800 Credit Suisse bankers employed to manage US client accounts, many of which were never declared to the IRS, and whose transactions were structured to avoid US tax reporting requirements.
From 2008 to 2011, after the break of a tax evasion scandal at fellow Swiss bank UBS, Credit Suisse starting putting an end to its evasive practices, asking clients to close their accounts or declare them.
In total, by the end of 2013, the number of Swiss accounts held by US clients at Credit Suisse fell by 85 percent, or the 19,000 clients believed to have had hidden assets, the report said.
Tax dodging
While the tone of the Senate hearing was harsh, with Senators complaining they had not received enough names of tax-dodging American clients, Swiss President Didier Burkhalter insisted the effect on Swiss-US relations should not be exaggerated.
“We must not overestimate the impact of these hearings,” Swiss President Didier Burkhalter told public broadcaster RTS during a visit to Washington.
He also pointed out that Bern has been waiting for five years for the Senate to ratify a double-taxation deal that is “essential for the collaboration” on tax issues between the two countries.
Credit Suisse is only one of 14 Swiss banks under US investigation for allegedly accepting tens of billions of undeclared dollars from US citizens.
And about a third of the countries other some 300 banks recently agreed to take part in a US programme where they will hand over information to Washington and accept to pay a steep fine in avoid legal action.
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