Credit Suisse Pleaded Guilty; Disclosure of US-Held Bank Accounts
On May 19, 2014, Credit Suisse AG pleaded guilty to conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the IRS. Credit Suisse agreed to pay huge fines and disclose certain information to the IRS and the US DOJ. Let’s look closer at certain parts of this deal and what this means to U.S. taxpayers who still hold undisclosed bank accounts at Credit Suisse or who held such accounts in any years since 2008.
Illegal Activities of Credit Suisse Acknowledged as Part of the Plea
The DOJ stated that, 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 U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.
According to the statement of facts filed with the plea agreement, Credit Suisse employed a variety of means to assist U.S. 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.
Fines that Credit Suisse Will Pay – A Huge Victory for the US Department of Justice
The giant bank agreed to pay a total of $2.6 billion – $1.8 billion to the Department of Justice for the U.S. Treasury, $100 million to the Federal Reserve, and $715 million to the New York State Department of Financial Services. Earlier this year, Credit Suisse already 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 U.S. clients without first registering with the SEC.
Credit Suisse has also agreed to implement programs to ensure its compliance with U.S. laws, including its reporting obligations under the Foreign Account Tax Compliance Act and relevant tax treaties, in all its current and future dealings with U.S. customers.
“This case shows that no financial institution, no matter its size or global reach, is above the law,” said Attorney General Holder. “Credit Suisse conspired to help U.S. 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.”
“This prosecution and plea should serve notice that secret accounts and assisting the evasion of income taxes have a high cost,” said U.S. Attorney Boente. “Concealing financial accounts from the U.S. 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 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.”
What Credit Suisse Will Further Disclose as Part of the Plea
This is the part which is most relevant to the U.S. taxpayers who had (or still have) undisclosed bank accounts at Credit Suisse at any point after January 1, 2008.
As part of the plea agreement, Credit Suisse 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 U.S. reporting obligations.
What Credit Suisse Guilty Plea Means to US Taxpayers with Undisclosed Credit Suisse Accounts
The guilty plea of Credit Suisse is likely to have a profound impact on U.S. taxpayers with undisclosed accounts. While the UBS case was a landmark victory for the IRS that changed the nature of the international tax enforcement, it was actually much more limited in “exposure” scope with respect to its own US accountholders than the Credit Suisse guilty plea (this is a true testament to how much more powerful the DOJ has become in Switzerland since 2008).
In essence, at this point, any US taxpayers with undisclosed Credit Suisse accounts should now assume that their non-compliant accounts now be closed (unless they do some type of voluntary disclosure) and/or they are likely to be disclosed by Credit Suisse to the IRS if the IRS makes a treaty request. Even worse, for any US taxpayers who had accounts at some point in 2008 and closed them prior to the guilty plea by Credit Suisse, there is no guarantee that these accounts will not be disclosed by Credit Suisse to the IRS. I would even venture to guess that the likelihood of the exposure of these accounts is very high now.
However, the IRS victory over Credit Suisse does not just stop at the Credit Suisse accountholders, but also all banks that dealt with Credit Suisse with respect to these US-owned accounts. This means that US taxpayers who transferred their funds out of Credit Suisse (presumably when they closed their non-compliant accounts) are likely to be at high risk of IRS detection.
Finally, Credit Suisse is likely to disclose to the IRS its main strategies with respect to opening, closing and maintaining non-compliant accounts through a business entity or a trust. This means that the IRS will now be able to initiate investigations based on patterns of activity, without necessarily having specific information about a given account. This means that all US taxpayers who benefitted from Credit Suisse help prior to the guilty plea by the bank, are likely to now be exposed (whether the intention behind this planning was tax evasion or legitimate asset protection).
The upshot of all of these factors is that US taxpayers who have had any undisclosed foreign bank accounts in Credit Suisse since 2008 are likely to be at high risk of IRS criminal investigation with huge FBAR monetary penalty exposure and potential jail sentence.
This means that these US taxpayers with undisclosed Credit Suisse bank accounts should consider their voluntary disclosure options as soon as possible. If the IRS learns about their identity prior to entering into a voluntary disclosure problem, the path to the OVDP (Offshore Voluntary Disclosure Program) may be closed with potentially huge disadvantages to such taxpayers.
Contact Sherayzen Law Office for Help with the Voluntary Disclosure of Your Credit Suisse Accounts
If you have undisclosed Credit Suisse accounts, contact Sherayzen Law Office for professional help. Owner Eugene Sherayzen is an experienced international tax lawyer who will thoroughly review the facts of your case, analyze your voluntary disclosure options, create a comprehensive voluntary disclosure strategy and implements (including preparation of all legal documents and tax forms as well as rigorous IRS representation).