Swiss banking giant Credit Suisse is paying US.$2.8 billion to resolve allegations from U.S. authorities that it helped its U.S. clients evade taxes.
The firm announced that it has reached a comprehensive, final settlement regarding all outstanding U.S. allegations, including agreements with the U.S. Department of Justice (DoJ), the New York State Department of Financial Services, the U.S. Federal Reserve Board, and the U.S. Securities and Exchange Commission (SEC). To resolve the claims, it agreed to pay US$2.8 billion, and it pled guilty to a criminal charge of conspiring to assist U.S. clients in presenting false income tax returns.
The final settlement includes $2 billion for the DoJ (including $196 million for the SEC that was announced back in February). One third of that total is to be allocated to the U.S. Internal Revenue Service (IRS). It’s also paying $715 million to the New York State Department of Financial Services, and $100 million to the Fed.
In announcing the deal, U.S. attorney general Eric Holder said that its investigation found that “Credit Suisse and its subsidiaries engaged in an extensive and wide-ranging conspiracy to help U.S. taxpayers evade taxes. The bank actively helped its account holders to deceive the IRS by concealing assets and income in illegal, undeclared bank accounts. These secret offshore accounts were held in the names of sham entities and foundations. This conspiracy spanned decades.”
Holder said that the bank deceived the IRS, the Fed, the SEC and the DoJ, and that it “went to elaborate lengths to shield itself, its employees, and the tax cheats it served from accountability for their criminal actions. They subverted disclosure requirements, destroyed bank records, and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds. They failed to take even the most basic steps to ensure compliance with tax laws.”
The bank says that the deal was coordinated with its global regulators, and that it doesn’t expect any impact on its licenses, nor any material impact on its operational or business capabilities. The impact of the final settlement in the second quarter will be 1.6 billion Swiss francs.
“We deeply regret the past misconduct that led to this settlement,” said Brady Dougan, CEO of Credit Suisse. “The US cross-border matter represented the most significant and longstanding regulatory and litigation issue for Credit Suisse. Having this matter fully resolved is an important step forward for us.”
Dougan added that it hasn’t seen any material impact on its business due to “heightened public attention on this issue in the past several weeks”. He noted that the settlement will reduce second quarter net income by CHF 1.6 billion, reducing its regulatory capital ratios. “We intend to reduce our risk-weighted assets to at or below the level of end 2013 as well as take other capital actions, including the sale of surplus real estate and other non-core assets,” he said, adding that this should restore its capital levels.