Credit Suisse and U.S. Senate disagree over Swiss banking secrecy laws

The U.S. Senate wants more transparency, while Credit Suisse says the ball is in the Senate’s court

It’s wheeling and dealing that would make Frank Underwood proud. We’ll open up our books, say Swiss bankers, but first the U.S. government has to give us something in exchange.

In a Senate hearing on Feb. 26, Credit Suisse executives faced a tough line of questioning from U.S. authorities who claimed that Swiss bank secrecy laws make rooting out fraud tougher than it needs to be. The Senate’s Permanent Subcommittee on Investigations alleges that Credit Suisse helps customers hide billions of dollars from the Internal Revenue Service (IRS).

“You say you can’t cooperate because of Swiss secrecy laws – but those laws don’t apply in the United States,” said Sen. Carl Levin, the chairman of subcommittee, according to the Wall Street Journal. “We are going to put a lot of pressure on our Justice Department…to enforce our laws — enforce them against you if you are unwilling to do what we think our laws require you to do.”

Credit Suisse, meanwhile, claims that one obstacle stands in the way: A 2009 treaty between the U.S. and Switzerland concerning banking records. The treaty would have given U.S. authorities greater access to Swiss banking records under the Foreign Account Tax Compliance Act. However, ratification of treaty has been opposed by Senator Rand Paul, who claims the treaty would allow too much private data about U.S. citizens to end up in the hands of foreign governments.

Because of this stalled treaty, said Credit Suisse Chief Executive Brady Dougan, the onus is not on Credit Suisse to change its policies, but rather the U.S. government to sign the treaty.

“Credit Suisse is ready to provide the additional information requested by U.S. authorities but has been unable to do so because the U.S. Senate has not yet ratified the protocol,” Dougan said. “We urge the Senate to ratify the protocol so the Swiss banks can assist U.S. authorities in recovering unpaid U.S. taxes.”

Dougan also claimed that under Swiss laws, which have strict privacy protections, the only way the bank would be allowed to release the data would be under treaty.

In a 2013 fourth quarter filing, Dougan claimed that Credit Suisse’s bottom line is as strong as ever, but some analysts questioned the company’s net profit below original analyst forecasts. The net profit for Credit Suisse’s fourth quarter came in at 267 million Swiss francs or $295 million, lower than Reuters’ forecast of 448 million Swiss francs.

 

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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