Credit Suisse probe puts Swiss officials on back foot again

Bloomberg

The latest probe into Credit Suisse Group AG is a blow, not just for the firm but also for the Swiss attorney general, who didn’t know some of the bank’s offices were going to be raided.
It’s too early to tell whether the Credit Suisse accounts being investigated are older, or include some that are more recent as the Australian tax authorities have suggested, Mark Branson, chief executive officer of Swiss financial watchdog Finma, told reporters in the Swiss capital Bern on Tuesday.
“Wealth managers in Switzerland may need more time to deal with the past,” Branson said. “These headlines will not vanish overnight, although the business model has fundamentally changed.”
Dutch authorities, who arrested two people last week, are probing dozens more on suspicion of concealing millions of euros in Swiss bank accounts, while criminal investigations are also under way in France, Germany, the U.K. and Australia. While many analysts assumed the raids are a legacy of untaxed assets accumulated before Swiss banks settled tax-evasion disputes with the U.S. Department of Justice, Australia’s tax authority has said some of the Credit Suisse bank accounts it’s investigating are “more current.”
Australian Probe
Out of roughly 1,000 account details given to the Australian authorities by the Dutch, the focus is initially on 346 people, Australian Taxation Office deputy commissioner Michael Cranston said in a telephone interview on Tuesday. The Zurich-based bank this week took out double-page advertisements in newspapers, including The Wall Street Journal, the Financial Times and Le Figaro, stating that “Credit Suisse applies a strict zero-tolerance policy on tax evasion.” In the ads, Credit Suisse said that in 2011 it had asked all clients to prove their tax-compliance.
Dutch Investigation
Iqbal Khan, head of international wealth management at Credit Suisse, has said that as far as he knew, the probes target individuals outside the bank and that no assets held at the bank were confiscated. Khan said last week he was surprised by the timing of the raids, coming the day before the introduction of new automatic exchange of information rules. Those regulations are intended to improve data sharing as authorities fight tax evasion.
Still, perhaps the Swiss shouldn’t have been too surprised. Tax authorities in the Netherlands asked their Swiss counterparts in July 2015 for details of Dutch clients at banks including Credit Suisse. The Dutch request pertained to clients who held non-compliant accounts at Credit Suisse between Feb. 1, 2013 and Dec. 31, 2014, according to a report in Le Matin Dimanche. The bank complied with the request, the newspaper said.
On Wednesday, Swiss Attorney-General Michael Lauber will be at the center of another media scrum in Bern. The attorney-general’s office said on March 31 it was “astonished” it hadn’t been informed in advance of the raids. The office, which is also working with Singaporean and U.S. prosecutors on probing how more than $3.5 billion was diverted from Malaysia’s 1MDB, said “rules of international cooperation were not followed” in the case.
Last Chapter
The Dutch investigation is probably “the last chapter” of a “hangover period” that’s the legacy of banking secrecy, said Bill Sharp, a U.S. tax lawyer who specializes in Swiss-American cases.
Credit Suisse was fined $2.6 billion in 2014 after admitting it helped Americans cheat on their tax obligations, and also paid 260 million euros ($277 million) to settle tax probes in Italy and Germany. Another 80 Swiss banks have entered into non-prosecution agreements with the DoJ in return for disclosing details on how their clients evaded taxes, while UBS Group AG paid $780 million in 2009 to settle its own dispute over tax evasion with the U.S. government.
Credit Suisse has reported more than 40 billion francs ($39.9 billion) in outflows since 2011 from clients that moved to become tax compliant, Khan said. While the bank has admitted past wrongdoing in relation to so-called legacy assets, he reiterated its current zero-tolerance of tax cheats.
The Dutch investigation shows cooperation on international law enforcement is working, with the net closing on tax dodgers, said George Turner, a researcher at the Tax Justice Network in London. Last week’s raids were coordinated by Eurojust, the agency that manages judicial cooperation across the 28-member European Union.