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Credit Suisse tentatively agrees to $2.5 billion payment over tax evasion probe

The bank will also plead guilty to criminal charges of tax evasion in the case

Financial institutions such as Credit Suisse Group AG are used to government-mandated penalties — the Swiss bank settled with the Federal Housing Finance Agency for $885 million in March. But this particular penalty has nothing to do with the financial crisis, and everything to do with perhaps a longer-term problem within the industry: tax evasion.

Credit Suisse has tentatively agreed to pay $2.5 billion and plead guilty to criminal charges alleging that the bank helped Americans evade taxes. U.S. regulators have been investigating Credit Suisse’s dealings with American citizens, believing that Swiss bank secrecy laws have been instrumental in helping stash taxable funds overseas.

Although the deal is not finalized, reports The Wall Street Journal, it could be announced as early as next week. The proposed settlement would see Credit Suisse pay $1.7 billion to the U.S. Department of Justice, $100 million to the Federal Reserve, and $600 million to the New York State Department of Financial Services.

The financial penalties are stiff, but according to sources close to the talks, the ultimate regulations are not expected to drive Credit Suisse out of business in the U.S. The bank’s license to do business in the U.S. will not be revoked, and the stiff penalties are not enough to fully cripple the bank’s operations.

The penalties may not have finished yet for Credit Suisse, however. The government probe is still investigating the names of individual account holders who stashed money overseas, and in March, one Credit Suisse banker pleaded guilty to charges of aiding tax evasion.

In February, Credit Suisse CEO Brady Dougan appeared before a U.S. Senate Subcommittee to answer for his company’s misdeeds. In the hearing, many senators, such as committee chairman Sen. Carl Levin, decried Credit Suisse hiding behind Swiss bank secrecy laws. “You say you can’t cooperate because of Swiss secrecy laws – but those laws don’t apply in the United States,” said Levin. “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.”

However, Dougan responded at the time that the ball was actually in the U.S. government’s court, per a U.S.-Switzerland banking records treaty that had yet to be signed. “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.”


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Assistant Editor

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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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