Another Bank Discloses Accountholders: Credit Suisse to Turn Over U.S. Account Data

Earlier this month Credit Suisse Group AG, Switzerland’s second-biggest bank, told U.S. clients it is giving confidential client account data to the Swiss tax authorities, who will decide whether to disclose it to the Internal Revenue Service. The U.S. is probing whether Credit Suisse helped Americans evade taxes, and the IRS used a 1996 tax treaty to request data for certain accounts held between 2002 and 2010, according to a November 2nd letter sent to a client by the bank. The IRS sought data for accounts owned through domiciliary companies in which clients are the beneficial owners, according to the letter.

The Swiss Federal Tax Administration issued an “immediately executable” order to the Zurich-based bank, which has no right to appeal, according to the letter. Taxpayers can consent to the SFTA handing over their account data to the IRS, or they can use the Swiss legal system to appeal a ruling by the SFTA that their account must be given to the IRS, according to the letter.

“Please be advised that Credit Suisse is not able to provide any information on whether or not information with respect to a specific account will be provided to the IRS,” according to the letter, signed by managing directors Michel Ruffieux and Stephan Gussmann. “In connection with the IRS treaty request, the SFTA has issued an order directing Credit Suisse AG to submit responsive account information to the SFTA,” the bank said in a statement.

Credit Suisse stated on July 15th that it is a target of a criminal probe by the Department of Justice over former cross-border private-banking services to U.S. customers. On July 21, seven Credit Suisse bankers were indicted on a charge of conspiring to help U.S. clients evade taxes through secret accounts.

The U.S. is conducting criminal probes of 11 financial institutions. U.S. and bank officials are concluding talks on a civil settlement that will probably require banks to pay billions of dollars and hand over the names of thousands of Americans who have secret accounts. Those people who have had their accounts disclosed will be subject to civil tax penalties by the IRS and potential prosecution by the Justice Department.

U.S. taxpayers can avoid prosecution by voluntarily disclosing their account to the IRS. Though the OVDI program window has closed, taxpayers with undisclosed foreign assets may still be able to file a traditional voluntary disclosure via the IRS VDP program that would allow them to avoid potential criminal prosecution.

In February 2009, UBS AG, the biggest Swiss bank, avoided criminal prosecution by paying $780 million, admitting it fostered tax evasion and giving the IRS data on more than 250 accounts to avoid criminal prosecution. It later turned over data on another 4,450 accounts and in October 2010, the U.S. dropped its criminal case against UBS. The Justice Department is pursuing new criminal cases against Swiss banks after American customers provided information on them through a U.S. voluntary-disclosure program. The U.S. crackdown against offshore tax evasion has led to charges against UBS AG, at least 21 foreign bankers, advisers and attorneys and at least 36 U.S. taxpayers.

It is predicted that other Swiss and many other banks (including HSBC) under investigation will eventually settle with the U.S. For U.S. citizens or residents who have not paid taxes on offshore assets, the hope of hiding from tax authorities seems increasingly unlikely.

Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.

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