Swiss back in firefight mode
• Observers blame legacy issues for new tax scandal, but Australians say they are investigating recent accounts
The latest investigation into Credit Suisse is a blow, not just for the firm but also for the Swiss attorney-general, who did not know some of the bank’s offices were going to be raided.
Swiss authorities are back in damage-control mode this week, after almost a decade of financial scandals including the Panama Papers.
It was too early to tell whether the Credit Suisse accounts being investigated were older or whether they included some that were more recent, as the Australian tax authorities had suggested, Mark Branson, CEO of Swiss financial watchdog Finma, said in the Swiss capital, Bern, on Tuesday.
“Wealth managers in Switzerland may need more time to deal with the past,” Branson said. “These headlines will not vanish overnight, although the business model has fundamentally changed.”
Dutch authorities, who arrested two people last week, are investigating dozens more on suspicion of concealing millions of euros in Swiss bank accounts, while investigations are also under way in France, Germany, the UK and Australia.
While many analysts have assumed the raids are a legacy of untaxed assets accumulated before Swiss banks settled tax-evasion disputes with the US department of justice, Australia’s tax authority has said some of the Credit Suisse bank accounts it was investigating were “more current”.
Out of roughly 1,000 account
details given to the Australian authorities by the Dutch, the focus was initially on 346 people, Australian Taxation Office deputy commissioner Michael Cranston said on Tuesday.
PANAMA PAPERS
While declining to say precisely when the accounts dated from, Cranston said it was not like the Panama Papers leak, where much of the data was decades old. “That’s not saying all of it’s active; some of them could have been opened in the last few years and closed very quickly,”
the Australian Taxation Office deputy commissioner said.
“But they are more current than generally we see.”
Credit Suisse said that it had not been contacted by the Australian authorities.
Daniel Regli, an analyst at Mainfirst in Zurich, said the case was bad for the bank’s reputation and reviving old cliches.
“It’s about past business practices, which Credit Suisse should have abandoned a while ago.”
The Zurich-based bank this week took out double-page
advertisements in newspapers including The Wall Street Journal, the Financial Times and Le Figaro, stating that “Credit Suisse applies a strict zero-tolerance policy on tax evasion”.
TAX COMPLIANCE
In the ads, Credit Suisse said that in 2011 it had asked all clients to prove their tax compliance.
Iqbal Khan, head of international wealth management at Credit Suisse, has said that as far as he knew, the investigations targeted individuals outside the bank and that no assets held at
the bank were confiscated. Khan said last week he was surprised by the timing of the raids, coming the day before the introduction of new automatic exchange of information rules. Those regulations are intended to improve data sharing as authorities fight tax evasion.
Still, perhaps the Swiss should not have been too surprised. Tax authorities in the Netherlands asked their Swiss counterparts in July 2015 for details of Dutch clients at banks including Credit Suisse. The Dutch request pertained to clients who held noncompliant accounts at Credit Suisse between February 1 2013 and December 31 2014, according to a report in Le Matin Dimanche. The bank complied with the request, the newspaper said.
Swiss attorney-general Michael Lauber will be at the centre of another media scrum in Bern on Wednesday. The attorney-general’s office said on Friday that it was “astonished” it had not been informed in advance of the raids.
The office, which is also working with Singaporean and US prosecutors on investigating how more than $3.5bn was diverted from Malaysia’s 1MDB, said “rules of international cooperation were not followed” in the case.
LAST CHAPTER
The Dutch investigation was probably “the last chapter” of a “hangover period” that was the legacy of banking secrecy, said Bill Sharp, a US tax lawyer who specialises in SwissAmerican cases.
Credit Suisse was fined $2.6bn in 2014 after admitting it helped Americans to cheat on their tax obligations. It also paid €260m to settle tax investigations in Italy and Germany.
Another 80 Swiss banks have entered into nonprosecution agreements with the US department of justice in return for disclosing details on how their clients evaded taxes, while UBS Group paid $780m in 2009 to settle its own dispute over tax evasion with Washington.
Credit Suisse reported more than Sf40bn ($39.9bn) in outflows since 2011 from clients that moved to become tax compliant, Khan said.