Credit Suisse, The US Department Of Justice, And The Rest Of The World
By Koen Roovers, Global Financial Integrity, May 27, 2014
By Koen Roovers
Originally posted on the Financial Transparency Coalition blog
Last week, Credit Suisse, a staple of the Swiss banking industry, pleaded guilty to conspiring to help US citizens “hide their wealth” for decades, in order to avoid taxes. The debate that has emerged in the wake of US Attorney General Eric Holder’s announcement seems to focus on whether or not the fine—roughly US$2.6 billion—is fair. Is it high enough?
Even so, the punishment might be some conciliation to the US. But is it naïve to think that the bank was only involved in this practice in the US? While the US might have the capacity and power to bring a powerful bank like Credit Suisse “to justice”, other countries might not be in that position.
The official website of Credit Suisse makes mention of 55 other countries of operation, besides the US and Switzerland. Among this list are a number of South American, Asian and African nations. Some of these very countries are at the center of the problem of illicit financial flows – money leaving a country undetected, untaxed, and unaccounted.
Surprisingly, far less attention has been paid to the ways in which the tax evasion took place. A press release issued by the US Department of Justice states blatantly that Credit Suisse has been ”assisting clients in using sham entities to hide undeclared accounts; [and] soliciting IRS forms that falsely stated, under penalties of perjury, that the sham entities were the beneficial owners of the assets in the accounts.” In the statement of facts, the tactics are further explained.
Credit Suisse bankers set up Swiss foundations, trusts and offshore companies to serve as tax evading structures. When this became too risky, they outsourced the practice to external corporate service providers, while still retaining ultimate control on behalf of their clients. The most prominent firm involved was run by a banker who previously worked for Credit Suisse.
This case, therefore, not only raises questions about the ability of public prosecutors to bring large financial institutions to justice, but also about the very fundamentals of our economies. If wealthy individuals can simply opt out of paying taxes—with the help of offshore banks that operate with little accountability to authorities elsewhere—then there are fundamental flaws in the system. This is a problem that affects almost everyone, everywhere.
Our hope is that the international bodies addressing these problems — the G20 and the OECD — find a system that supports those fighting tax evasion throughout the world.