The report said Credit Suisse transferred more than $100 million tied to a U.S. family with dual citizenship to offshore accounts without notifying the Justice Department, which would violate the plea agreement. The report says bank employees also “knowingly and willfully” helped Dan Horsky, an American business school professor who in 2016 pleaded guilty in a tax fraud case, shield $220 million from U.S. tax authorities.
Moreover, the report notes that, years after the plea agreement, Credit Suisse disclosed that there were 23 “potentially undeclared accounts” belonging to U.S. citizens, each containing at least $20 million. Americans hid at least $700 million with Credit Suisse, the report said.
“It could be much higher than that,” said Ryan Carey, Senate Finance Committee spokesman. “We just don’t have much visibility into those accounts,” only that they contained at least $20 million.
In a statement, Credit Suisse said that the report detailed “legacy issues,” some extending back a decade, and that it has implemented protocols meant to root out individuals seeking to hide assets from U.S. tax officials. The bank noted that it has been cooperating with the Senate committee, as well as the Justice Department, “to address some remaining legacy conduct or policy concerns, and will continue to do so.”
“Credit Suisse does not tolerate tax evasion,” the statement said.
The accusations come during a turbulent period for Credit Suisse, which is now in the process of being gobbled up by rival UBS under a hasty deal engineered by the Swiss government. UBS acquired Credit Suisse this month for $3.3 billion as concerns mounted over the bank’s stability. The move was intended to inject calm in the banking system, which was still reeling from the collapse of Silicon Valley Bank and Signature Bank in the United States. And though a measure of calm has resumed in the sector, UBS must still undertake the monumental task of merging with another behemoth.
The panel’s findings may be another headache in that process. The report’s authors believe that any entity that acquires Credit Suisse would be liable for any penalties resulting from violations of the 2014 plea agreement, in which Credit Suisse agreed to disclose all of its cross-border activities, among other measures. If pursued by the Justice Department, penalties could exceed more than $1 billion in fines.
In a statement to The Washington Post, UBS spokeswoman Erica Chase said: “As part of our due diligence related to UBS’s acquisition of Credit Suisse, we made an assessment of outstanding litigation and investigation matters. We expect the transaction will be accretive to our shareholders in a wide range of business scenarios.”
Because Credit Suisse was already coming off a year of substantial losses, a potential fine of $1 billion would be no trivial fine for UBS, said John Sedunov, a finance professor at Villanova University.
“This can certainly muddy the water for UBS,” Sedunov said.
Despite signs of stability, uncertainty still grips the banking sector, as the spotlight turns to what caused the broader banking meltdown and what can be done to avoid another one. Top officials from the Federal Reserve, the Treasury Department and the Federal Deposit Insurance Corporation faced questioning in Congress this week, and President Biden is preparing to push regulators to impose tighter rules on midsize banks.
Before this month’s takeover, Credit Suisse had been dogged by mismanagement and compliance issues — last year it reported roughly $8 billion in losses. In May 2014, Credit Suisse pleaded guilty to helping wealthy Americans hide billions of dollars to evade paying taxes. In exchange for paying a lower fine — $1.3 billion — the bank had also agreed to a set of compliance measures, including disclosing its cross-border activities, cooperating with Justice Department requests for account information and closing all accounts belonging to account holders that refused to comply with U.S. tax laws.
The bank violated some of those terms, the Finance Committee concluded. The report urged the Justice Department and Internal Revenue Service to immediately investigate whether the bank should pay additional fines.
The Post and other news outlets reported in October 2021 that global elites have long exploited a secretive offshore system to hide their wealth from tax authorities, criminal probes and creditors. While Swiss banks are notorious for helping the wealthy shield their riches, tax havens also exist in the United States.
The Senate panel’s allegations against Credit Suisse likely won’t shake broader public confidence in the banking system, Sedunov said. He noted that consumers have not been deterred by other banking scandals, including the $3.7 billion penalty Wells Fargo was ordered to pay in December over its mismanagement of loans and overdraft fees.
“We’ve seen this happen multiple times,” he said. “And I think people — they’re used to it.”