In federal court Monday in Alexandria, Va., Credit Suisse (CS) pled guilty to conspiring to aid tax evasion and agreed to pay $2.6 billion in fines, approximately $1.8 billion of which will go to the Department of Justice and $715 million to the office of New York State’s top financial regulator, Benjamin Lawsky. As Attorney General Eric Holder pointed out at a press conference, 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. “A company’s profitability or market share can never and will never be used as a shield from prosecution or penalty. And this action should put that misguided notion definitively to rest.”
The case is unlikely to satisfy the government’s critics who have complained that prosecutors have been too hesitant to punish banks for breaking the law. What it likely will do, however, 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 U.S. 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 LLP 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 American’s evade taxes in 2013 and ultimately went out of business. Another 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 U.S. 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 license 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,” the Credit Suisse Chief Executive Officer Brady Dougan, told the New York Times. “Our discussions with clients have been very reassuring, and we haven’t seen very many issues at all.” Both he and the bank Chairman Urs Rohner are expected to keep their jobs.