This week the Swiss bank, Credit Suisse, was forced by the US Department of Justice to pay a fine of $2.6bn for its secret activities in enabling its US clients to evade US taxes. Ever since 2009 when UBS buckled under pressure from US prosecutors and agreed to pay $0.78bn in fines and to pass on information about tax-evading US citizens, there has been a steady increase in information-sharing by banks with the tax authorities. This week the thumbscrew was turned tighter, not only by the magnitude of the fine, but even more by forcing Credit Suisse to admit criminal culpability.
While UBS was given the soft option of a so-called deferred prosecution agreement which avoided the taint of criminality, 5 years later the Swiss bank if taking the full rap for these offences. It is being severely (and rightly) punished for allowing (or abetting) its bankers in concealing its US clients’ assets in a conspiracy that extended for decades, and because its staff actively hindered investigagtions aimed at uncovering it.
The toughening US stance reflects the widespread view that banks are not adequately being held to account for major violations like sanctions-busting and manipulation of benchmark interest rates. There was also the view that some banks are too big to prosecute that needed to be countered. In addition the US authorities built up the pressure much further by passing the FATCA Act requiring foreign banks and other financial institutions to share information about their US clients with the Internal Revenue Service. As a result the US Department of Justice is now investigating more than a dozen banks over past cases when they may have helped US citizens avoid taxes. A further 106 Swiss banks have sought to comply with the new rules as part of the soft option of a deferred prosecution agreement.
All this has been done by the US. Contrast that with UK foot-dragging and complacency. In the British case, there have been no enormous fines, no UK FATCA passed, no chief executive or directors of a bank personally prosecuted, and no serious attempt to force the 10 worldwide tax havens controlled by British jurisdictions to provide full information about their UK clients.
