Prizing discretion as they do, Swiss bankers prefer to avoid the limelight. Especially uncomfortable is the attention of the United States Senate, in which a subcommittee headed by Senator Carl Levin (Democrat, Michigan) has gone after American tax dodgers and their accomplices like a starving hound chasing a fox.A 2008 hearing on UBS led to a US$780 million fine for the largest Swiss bank and, in an unprecedented breach of bank secrecy, the handover of names linked to 4,700 accounts.
This week it was the turn of Credit Suisse, the Alpine country's other banking giant, to answer questions stemming from a scathing 175-page report.The subcommittee found much evidence of subterfuge in 2001-2008, some of it provided by former Credit Suisse clients who had joined a voluntary-disclosure programme. Private bankers went out of their way to avoid paper trails. Some snuck into America on tourist visas. Others told clients not to send faxes with American area codes.
Transactions were split into amounts that would not trigger reporting requirements for cash transfers. Clients were helped to disguise account ownership using shell companies. The bank did not always follow its own policies on such accounts. All were supposed to be booked through an office whose bankers were trained in American regulatory requirements. Instead as many as 10,000 were run from a branch at Zurich airport, known cryptically as "SIOA5."
Investigators also found possible bookkeeping discrepancies. A common measure of private banks' performance is "net new assets" flowing in. The report concludes that in 2012 the bank reclassified–publicly but not internally–its net new assets so that some previously allocated to the Americas now were counted as Swiss. The suspicion is that this was done to bolster the flagship domestic business as tax probes began to bite.
The bank says that it is investigating, but that differences between internal and external numbers are not unusual.The committee does not accuse Credit Suisse of trying to sign up clients who fled UBS when that bank was targeted. It does, however, say that it was slow to close accounts held by Americans, at least 85 per cent of which were untaxed, according to estimates.
At the hearing, an American who is presumably fully tax-compliant–Brady Dougan, Credit Suisse's chief executive–expressed deep regret for the bank's past violations, but insisted that these were attributable to a "small group" of rogues who skirted the bank's controls and hid their doings from senior management.
In 2008 some 1,800 Credit Suisse employees were involved in opening or servicing accounts for Americans, suggesting wrongdoing was "systematic," responded Senator John McCain (Republican-Arizizona), the sub-committee's senior Republican.
The bank was not the only target. The Department of Justice was faulted for taking its foot off Swiss throats after the humbling of UBS. The publicity generated by the hearing might well spur the Justice Department to take a harder line in ongoing negotiations with Credit Suisse and a dozen other Swiss banks on settlements regarding their past involvement in tax evasion.
The Economist