Switzerland-based Credit Suisse was sentenced today, following a guilty plea in May, and will pay $2.6 billion to state and federal agencies, for conspiracy to aid and assist U.S. taxpayers in filing false income tax returns and other documents with the Internal Revenue Service.
The sentencing of Credit Suisse is the result of a years-long investigation by U.S. law enforcement authorities that has also produced indictments of seven Credit Suisse employees and the owner of a trust company since 2011—two of those individuals have pleaded guilty so far—and of Credit Suisse U.S. clients.
At sentencing in the U.S. District Court for the Eastern District of Virginia, U.S. District Chief Judge Rebecca Beach Smith entered judgment and conviction and a restitution order requiring Credit Suisse to pay approximately $1.8 billion dollars to the United States by Nov. 28. Of that amount, Credit Suisse will pay a fine of $1.1 billion to the Justice Department’s Crime Victims Fund, and $666.5 million in restitution to the IRS. The parties agreed that Credit Suisse cannot challenge the restitution amount, which can also provide a basis for an IRS civil tax assessment.
In addition to criminal fine and restitution, Credit Suisse will pay another $100 million to the Federal Reserve and $715 million to the New York State Department of Financial Services. Earlier this year, Credit Suisse negotiated cease and desist orders with the Federal Reserve and the state of New York, requiring the bank to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations in addition to the civil penalties.
Credit Suisse also paid approximately $196 million in disgorgement, interest, and penalties to the Securities and Exchange Commission 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.
“As we expand our offshore investigations, not just in Switzerland, but around the world, the message to banks who engaged in these crimes is clear: Step forward, accept responsibility for your past conduct, and help us hold responsible the U.S. taxpayers who benefitted, and the individuals who assisted them,” said Deputy Attorney General James Cole. “Only through full cooperation will you avoid the most severe sanctions.”
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, 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 records in the United States 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.
As part of the plea agreement, Credit Suisse further 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.
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.