June 18, 2024

DealBook: Credit Suisse to Turn Over Data on Some U.S. Accounts

A branch of Credit Suisse in Basel, Switzerland. The I.R.S. asked for help in locating information on American account holders.Arnd Wiegmann/ReutersA branch of Credit Suisse in Basel, Switzerland.

11:31 a.m. | Updated

PARIS — Credit Suisse has been ordered by the Swiss government to turn over account data on some wealthy American clients as part of a U.S. effort to crack down on tax evasion, the bank said on Tuesday.

The bank, based in Zurich, wrote in an e-mailed statement that the U.S. Internal Revenue Service had recently asked the Swiss Federal Tax Administration for help in locating information on American account holders under a 1996 American-Swiss tax treaty.

Credit Suisse said the Swiss tax administration had responded with ‘‘an order directing Credit Suisse A.G. to submit responsive account information’’ to the Swiss authorities.

Alex Biscaro, a Credit Suisse spokesman in Zurich, said the bank had begun to inform some U.S. clients by letter about the order, but he declined to comment further on the case. Beat Furrer, a spokesman for the Swiss tax administration, declined to detail the nature of the request. Dean Patterson, a spokesman in Washington for the I.R.S., declined to comment.

The letters that Credit Suisse was sending to clients gave two options, according to Paul Behling, a partner at Withers Bergman, an international law firm: Either consent to the account data being turned over to the I.R.S. or file an appeal with the Swiss authorities.

Mr. Behling said he would advise clients who believed they had a basis to appeal to do so, but that others should consider going to the I.R.S. and trying to negotiate a lighter penalty. Under U.S. law, cheating the tax authorities can be punished with up to five years in prison and civil penalties.

Not all of the bank’s U.S. clients are affected by the order. The I.R.S. provided Swiss authorities with detailed information on the Credit Suisse clients in question, suggesting they had obtained information about those individuals independently. The fact that the request was made under the existing treaty showed that there has been no global deal on client data.

‘‘U.S. officials are mining the data from the 30,000 people who have participated in the voluntary disclosure programs,’’ Mr. Behling said, referring to an I.R.S. initiative to encourage people with hidden offshore accounts to come clean. Those who entered the program did so were required to name names about the bankers and other advisers who helped them to set up accounts and offshore corporations.

‘‘The initial focus of the I.R.S. on Credit Suisse seems to be on U.S. persons holding offshore accounts through corporations or trusts,’’ he said. ‘‘This is not the end of it.’’

The United States and several European countries, notably Germany, Britain and France, have been seeking in recent years to ensure that their citizens cannot take advantage of Swiss banking secrecy to hide assets. The Offshore Compliance Initiative, a U.S. Justice Department effort to track down tax cheats, is conducting criminal investigations into at least eight banks.

The Justice Department told Credit Suisse in July that it was the object of an investigation as part of ‘‘a broader industry inquiry’’ after four private bankers with links to Credit Suisse were indicted in February by the U.S. authorities on charges that they helped Americans to avoid taxes.

Credit Suisse said last week that it was setting aside 478 million Swiss francs, or $535 million, for legal costs related to tax evasion charges in the United States and Germany. In September, it reached a deal with the German authorities to end an investigation over allegations that employees in Düsseldorf had helped German clients to hide income from tax collectors.

UBS, the biggest Swiss bank, paid $780 million in 2009 in the tax investigation and later agreed to hand over some client names to avoid prosecution.

In October, Bank Julius Baer, a private Swiss bank, said two of its advisers had been charged with conspiring to help clients evade U.S. taxes on more than $600 million hidden in offshore accounts.

Article source: http://feeds.nytimes.com/click.phdo?i=eed8171660d2825b7680574666588eca

Credit Suisse to Pay 150 Million Euros to Settle German Tax

“A complex and prolonged legal dispute has been avoided, with an agreed solution that provides legal certainty,” the bank said in a statement.

Later this week the German and Swiss governments are looking to sign a deal on taxing money stashed by German citizens in secret Swiss accounts, a German government source told Reuters on Sunday.

The terms of the deal were struck in August when Switzerland and Germany agreed to tax money held by German citizens in secret accounts, estimated at up to 150 billion Swiss francs.

The agreement could set a model for agreements between Switzerland and other countries, although they still require the approval of the Swiss and German parliaments.

Credit Suisse has come under increasing scrutiny from prosecutors in Germany this year.

In August Duesseldorf’s chief prosecutor Ralf Moellmann said his office intended to intensify its probe of Credit Suisse, after the bank’s offices in Germany were raided in February as part of a broader clampdown on tax evasion.

Credit Suisse’s payment is higher than that of smaller rival Julius Baer, which earlier this year agreed to pay German tax authorities 50 million euros to close a tax probe and avoid potential legal action against the bank and its employees in the country.

Credit Suisse is also the target of a formal U.S. tax probe, and a number of current employees and former employees have been charged with helping U.S. citizens dodge U.S. taxes.

The United States is also pushing for a deal similar to the one struck on UBS client data two years ago, seeking details of all U.S. clients with accounts worth at least $50,000 (31,772.26 pounds) between 2002 and 2010 at banks including Credit Suisse, Julius Baer and Wegelin as well as some regional banks.

(Editing by Greg Mahlich)

Article source: http://www.nytimes.com/reuters/2011/09/19/business/business-us-creditsuisse.html?partner=rss&emc=rss

Swiss Banks Urge ‘United Front’ Against U.S. Pressure on Tax Evasion

The trade group’s chairman, Patrick Odier, urged the Swiss people and the government to “put up a united front” and work out a solution that applies to all countries. He said that U.S. and Swiss politicians must work with existing accords.

“The solution must be globally applicable, be definitive and correspond to existing Swiss law,” Mr. Odier told the association at a meeting in Basel, Switzerland, according to his prepared remarks. “A second bilateral treaty has to be avoided and the U.S. needs to respect this.”

A double taxation agreement was approved by Switzerland in 2009, but is still awaiting ratification by the U.S. Senate.

The United States last year forced Switzerland to agree to a separate bilateral tax treaty to prevent the country’s biggest bank, UBS, from facing damaging civil litigation in U.S. courts for helping thousands of Americans hide money in offshore accounts.

UBS was forced to hand over the names of thousands of American account holders and pay a $780 million fine in a landmark case that pierced Switzerland’s storied tradition of banking secrecy. Swiss lawmakers are due to approve a revised tax agreement with the U.S. this fall.

But Switzerland now fears that U.S. officials may try to bring charges against one or more Swiss banks, including Credit Suisse, if it does not divulge more details on how many Americans may have used Swiss banks to avoid paying their U.S. taxes.

The Swiss government has also faced similar growing pressure outside the United States, and has signed revised agreements with several countries, including Germany and Britain, to provide greater help to foreign tax authorities seeking information on their citizens’ accounts in the Alpine nation.

Taken together, the moves have been widely seen as the beginning of the end of Switzerland’s strict policy of noncooperation with foreign authorities in tax evasion cases.

“The U.S. should take the tax agreements with Germany and the United Kingdom as an example. Bilateral problems between friendly nations should be solved by mutual agreement,” Mr. Odier said.

The agreements with Germany and Britain were both reached in August. Swiss banks will pay an up-front guarantee of 2 billion francs, or nearly $2.7 billion, to Germany and 500 million Swiss francs, or $630 million, to Britain.

German residents who haven’t previously declared existing assets in Switzerland will have the chance to make a one-time tax payment totaling between 19 and 34 percent of those assets, or to declare them to German authorities. Similarly, British clients will have the option of making an anonymous one-off payment for taxes owed in the past, or declaring their assets to British authorities.

The Swiss Bankers Association said also that there may be rough times ahead because of the strong franc and new banking requirements to boost capital holdings.

In a statement Monday, it said “the economic and regulatory trends indicate that there may be some headwinds going forward.”

But the group reported that Swiss banks’ combined assets rose slightly to 2.7 trillion francs, and generated earnings of 61.5 billion francs in 2010 — an increase of 13.4 percent in earnings on the year.

The value of the franc has risen sharply as a safe haven for investors, but that has made Swiss exports more expensive, driving down profits.

Banks also must meet new rules to gradually increase their capital cushions, eating into the amount they can invest.

Article source: http://www.nytimes.com/2011/09/06/business/global/swiss-banks-urge-united-front-against-us-pressure-on-tax-evasion.html?partner=rss&emc=rss

Overseas Banks Could Face Novel Penalty From U.S.

The penalty stems from the violation of a rule known as Foreign Bank and Financial Accounts, or Fbar(pronounced EF-bar), that requires American taxpayers with overseas bank accounts and foreign assets to file a special disclosure with the Treasury Department each year. The top penalty for failing to file the disclosure is 50 percent of the account balance for each year of violation, a level that can leave tax evaders owing multiples of what their accounts hold.

Now the Justice Department, which is conducting a broadening inquiry into Swiss and Swiss-style banks, including Credit Suisse and HSBC, according to court papers and statements by the banks, is exploring how and whether it could apply the penalty to the banks, should it find that they violated American tax laws, according to two persons briefed on the matter. The persons, one in government and the other in private legal practice, spoke only on the condition of anonymity.

Under the Fbar filing requirement, which is intended to help tax authorities unearth undeclared assets held abroad, American citizens and residents with foreign accounts that collectively hold more than $10,000 are required to file the disclosure form to the Treasury Department by June 30. Tax lawyers have generally read the requirement as applying to American citizens and residents — not to American banks or to foreigners of any kind.

But buried in the language of the requirement are provisions that a few criminal defense and tax lawyers say cover foreign financial institutions and their foreign bankers.

Jeffrey Neiman, a former federal prosecutor now in private practice in Fort Lauderdale, said that “under my reading of the Fbar rules, if the government can prove that a financial institution willfully caused an Fbar violation, the government could seek a penalty on the financial institution, no matter where in the world it is based, for up to 50 percent of the balance of all accounts in question.” Recent government cases against four Credit Suisse private bankers, among others, cite efforts by the bankers to dissuade American clients from filing the disclosures.

Mr. Neiman was a federal prosecutor in Fort Lauderdale until April 4 and oversaw many government filings against clients and employees of UBS, the big Swiss bank, over private banking services that enabled offshore tax evasion.

In 2009, UBS paid a $780 million fine and admitted to criminal wrongdoing over its sale of offshore private banking services to scores of wealthy Americans.

The new approach by the Justice Department, which last week gained approval by a California federal judge to serve a broad summons on HSBC for details of offshore accounts held by wealthy Indian-Americans, is a fresh potential headache for Swiss and Swiss-style banks. No Fbar penalties were included in the $780 million that UBS paid.

The new approach “ratchets up the stakes, because it potentially puts the financial resources of the financial institution at risk,” said Niles Elber, a tax lawyer at Caplin Drysdale, in Washington, who specializes in Fbar regulations.

The Justice Department gave a little-noticed glimpse into part of its new strategy in recent court papers about a senior Credit Suisse private banker, Christos Bagios.

In papers filed March 15, federal prosecutors wrote that Mr. Bagios “could be forced to pay a Fbar penalty for as much as $19 million for just one tax year, and therefore face financial ruin.” The papers explained in a footnote that Mr. Bagios had serviced clients that had at least $38 million in their undeclared accounts. “On the theory that he aided and abetted their failure to disclose their accounts, the 50 percent penalty could apply,” they said.

While Mr. Neiman represented the government in some of the initial filings against Mr. Bagios, he was not involved in the March 15 motion. Mr. Neiman was not one of the two people who described the new strategy when asked about the motion.

Four tax lawyers with knowledge of the Fbar regulations said that they were generally unaware of their applicability to foreign banks and their bankers.

But Edward Tanenbaum, a tax lawyer at Alston Bird in New York, said that it was possible to read the Fbar regulations and accompanying penalties as applying in some cases to foreign persons who live and work in the United States.

In recent years, the I.R.S. has twice granted American tax evaders who came forward to declare their hidden assets a break on the Fbar penalty.

Article source: http://feeds.nytimes.com/click.phdo?i=5bf32fc5bfd2f9c9033bc4d6dfc25d12