This is a follow-up to our post two weeks ago on the hearing in Congress on the status of U.S. investigations into alleged offshore tax evasion facilitated by Swiss banks.
As we noted in our February 20 post, the large bank at the center of the current controversy is Credit Suisse.
In this post, we will update you on what happened at the hearing and put it in the context of the ongoing crackdown by U.S. authorities against alleged tax evasion through undisclosed foreign accounts.
U.S. authorities have demanded that Swiss banks give up the names of U.S. taxpayers who may have failed to disclose their accounts in those banks.
Executives from Credit Suisse told a Senate subcommittee chaired by Sen. Carl Levin that Switzerland's historic banking privacy laws have made it difficult for the bank to do so.
Taking a combative posture, Senator Levin announced that "the jig is up" on offshore tax evasion. His committee also released a 181-page report documenting the U.S. concerns.
These concerns are not merely abstract. They include criminal charges against at least seven bankers from Credit Suisse. Though none of those bankers has stood trial, they are understandably afraid to travel to the U.S. because they fear being arrested.
In addition, Credit Suisse has already admitted to U.S. securities violations regarding the delivery of investment and brokerage services to U.S. clients. To settle those charges, the bank paid $196 million to the Securities and Exchange Commission.
Credit Suisse also faces potential fines of hundreds of millions of dollars in connection with the tax evasion allegations. Another big Swiss bank, UBS, has paid a colossal penalty as well, to the tune of $780 million.
In short, the "jig" that Senator Levin says is up has become an expensive dance for Swiss banks. It is also a precarious one for their U.S. customers, who may face difficult decisions about whether to make voluntary disclose to the IRS of their previously unreported offshore accounts.
The Wall Street Journal, "10 Takeways from Credit Suisse's Senate Hearing on Tax Evasion," Maureen Farrell, Feb. 26, 2014