The End of the Se­cret Swiss Bank Ac­count

The Economic Times - - World View - SHEE­LAH KOL­HATKAR

In a federal court in Vir­ginia, Credit Suisse pled guilty to con­spir­ing to aid tax eva­sion and agreed to pay $2.6 bil­lion in fines. As US At­tor­ney Gen­eral Eric Holder pointed out, Credit Suisse is the largest fi­nan­cial com­pany to plead guilty in 20 years. “This case shows that no fi­nan­cial in­sti­tu­tion, no mat­ter its size or global reach, is above the law,” Holder said.

Yet the case is un­likely to sat­isfy US govern­ment’s crit­ics who have com­plained that prose­cu­tors have been too hes­i­tant to pun­ish banks for break­ing the law. What it likely will do is mark the end of the Swiss bank ac­count as Amer­i­can tax shel­ter. In 2009, the Swiss bank UBS set­tled with the US govern­ment over sim­i­lar ac­cu­sa­tions, agree­ing to pay a $780 mil­lion fine and to hand over names of Amer­i­cans with se­cret bank ac­counts. “For US tax­pay­ers it is go­ing to be im­pos­si­ble to hide money in Switzer­land, and it is just a mat­ter of time that this is the case also for Ger­mans and Bri­tons,” Asher Ru­bin­stein, a part­ner at Ru­bin­stein & Ru­bin­stein in New York, told Reuters at the time. “Switzer­land will no longer be a tax haven.”

Switzer­land’s old­est bank, Wegelin & Co, pleaded guilty to help­ing Amer­i­cans evade taxes in 2013 and ul­ti­mately went out of busi­ness. A smaller Swiss bank with no US pres­ence, Bank Frey, is in the process of shut­ting down for sim­i­lar rea­sons. The Credit Suisse case is the re­sult of sev­eral years of work and co­or­di­na­tion among mul­ti­ple law en­force­ment and reg­u­la­tory agencies. It will likely make it eas­ier for the govern­ment to bring crim­i­nal charges against other fi­nan­cial firms in the fu­ture, in­clud­ing — pos­si­bly — against US banks, which so far have dis­pensed with their le­gal prob­lems pri­mar­ily by pay­ing ex­or­bi­tant set­tle­ments and fines.

Still, the Credit Suisse set­tle­ment also high­lights the awk­ward, al­most hope­less task that faces prose­cu­tors seek­ing to pun­ish banks for wrong­do­ing: caus­ing a big bank to lose its li­cence and abil­ity to op­er­ate could cause se­vere dam­age to the fi­nan­cial sys­tem, yet tak­ing steps to pro­tect the bank from any busi­ness fall­out from the charges, as prose­cu­tors did in this case, in­su­lates it from any pun­ish­ment be­yond the hefty fine. The banks have ba­si­cally be­come un­touch­able. “We have found no in­stances where clients can­not do busi­ness with us,” Credit Suisse CEO Brady Dougan, told New York Times. Both he and the bank Chair­man Urs Rohner are ex­pected to keep their jobs.

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