A bipartisan staff report entitled, “Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts,” issued by the U.S. Senate’s Permanent Subcommittee on Investigations has found that, for years, Credit Suisse “employed banking practices that facilitated tax evasion by U.S. customers” – and that there has been “lax enforcement” by U.S. prosecutors against U.S. citizens who evaded taxes on billions of dollars held in Credit Suisse accounts.

The report was issued in connection with a subcommittee hearing, Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts.

The report found that from at least 2001 to 2008, Credit Suisse employed banking practices that facilitated tax evasion by U.S. customers, including by opening undeclared Swiss accounts for individuals, opening accounts in the name of offshore shell entities to mask their U.S. ownership, and sending Swiss bankers to the United States to recruit new U.S. customers and service existing Swiss accounts without creating paper trails.

At its peak, according to the report, Credit Suisse had over 22,000 U.S. customers with Swiss accounts containing assets that exceeded 12 billion Swiss francs.

Moreover, the report declared, Credit Suisse’s efforts to close undeclared Swiss accounts opened by U.S. customers took more than five years, failed to identify how many were undeclared accounts hidden from U.S. authorities, and fell short of identifying any leadership failures or lessons learned from its legally-suspect U.S. cross border business.

The report’s ire was not directed solely at Credit Suisse. The report stated that, despite the passage of five years, U.S. law enforcement “has failed to prosecute more than a dozen Swiss banks that facilitated U.S. tax evasion, failed to take legal action against thousands of U.S. persons whose names and hidden Swiss accounts were disclosed by UBS, and failed to utilize available U.S. legal means to obtain the names of tens of thousands of additional U.S. persons whose identities are still being concealed by the Swiss.”

Switzerland also did not fare well in the report. Since 2008, the report found, Swiss officials have worked to preserve Swiss bank secrecy by intervening in U.S. criminal investigations to restrict document production by Swiss banks, pressuring the United States to construct a program for issuing non-prosecution agreements to hundreds of Swiss banks while excusing those banks from disclosing U.S. client names, enacting legislation creating new barriers to U.S. treaty requests seeking U.S. client names, and managing to limit the actual disclosure of U.S. client names to only a few hundred names over five years, despite the tens of thousands of undeclared Swiss accounts opened by U.S. clients evading U.S. taxes.

The report recommended steps that, if adopted, will make offshore tax evasion a key financial fraud issue for this year – as predicted by the Financial Fraud Law Blog last year, in #10 in Financial Fraud Law for the Year Is…., and perhaps beyond. The report recommended:

(1) Improve Prosecution of Tax Haven Banks and Hidden Offshore Account Holders. To ensure accountability, deter misconduct, and collect tax revenues, the Department of Justice should use available U.S. legal means, including enforcing grand jury subpoenas and John Doe summons in U.S. courts, to obtain the names of U.S. taxpayers with undeclared accounts at tax haven banks. DOJ should hold accountable tax haven banks that aided and abetted U.S. tax evasion, and take legal action against U.S. taxpayers to collect unpaid taxes on billions of dollars in offshore assets.

(2) Increase Transparency of Tax Haven Banks That Impede U.S. Tax Enforcement. U.S. regulators should use their existing authority to institute a probationary period of increased reporting requirements for, or to limit the opening of new accounts by, tax haven banks that enter into deferred prosecution agreements, non-prosecution agreements, settlements, or other concluding actions with law enforcement for facilitating U.S. tax evasion, taking into consideration repetitive or cumulative misconduct.

(3) Streamline John Doe Summons. Congress should amend U.S. tax laws to streamline the use of John Doe summons procedures to uncover the names of taxpayers using offshore accounts and other means to evade U.S. taxes, including by allowing a court to approve more than one John Doe summons related to the same tax investigation.

(4) Close FATCA Loopholes. To obtain systematic disclosure of undeclared offshore accounts used to evade U.S. taxes, the U.S. Treasury and IRS should close gaping loopholes in FATCA regulations that have no statutory basis, including provisions that allow financial institutions to ignore account information stored on paper, and allow foreign financial institutions to treat offshore shell entities as non-U.S. entities even when beneficially owned and controlled by U.S. persons.

(5) Ratify Revised Swiss Tax Treaty. The U.S. Senate should promptly ratify the 2009 Protocol to the U.S.-Switzerland tax treaty to take advantage of improved disclosure standards.

The subcommittee is holding a hearing today at 9:30 a.m., “Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts.”

According to the subcommittee, the hearing will continue its “examination of tax haven bank facilitation of U.S. tax evasion, focusing on the status of efforts to hold Swiss banks and their U.S. clients accountable for unpaid taxes on billions of dollars in hidden assets. Witnesses will include representatives from a Swiss bank and the U.S. Department of Justice.” Here is the witness list:

PANEL 1

• • BRADY W. DOUGAN

Chief Executive Officer

Credit Suisse Group AG, Credit Suisse AG

New York, NY

• • ROMEO CERUTTI

General Counsel

Credit Suisse Group AG, Credit Suisse AG

Zürich, Switzerland

• • HANS-ULRICH MEISTER

Co Head, Private Banking and Wealth Management, Chief Executive Officer - Region Switzerland

Credit Suisse Group AG, Credit Suisse AG

Zürich, Switzerland

• • ROBERT S. SHAFIR

Co Head, Private Banking and Wealth Management, Chief Executive Officer - Region Americas

Credit Suisse Group AG, Credit Suisse AG

New York, NY

PANEL 2

• • THE HONORABLE  JAMES M. COLE

Deputy Attorney General - Office of the Attorney General

U.S. Department of Justice

Washington, DC

• • THE HONORABLE   KATHRYN M. KENEALLY

Assistant Attorney General - Tax Division

U.S. Department of Justice

Washington, DC

The chairman of the subcommittee is Senator Carl Levin; Senator John McCain is the ranking minority member. Current or former staff members involved in the preparation of the report were:

ELISE J. BEAN

Staff Director and Chief Counsel

ROBERT L. ROACH

Counsel and Chief Investigator

ALLISON F. MURPHY

Counsel

ANGELA MESSENGER

Detailee

JOEL CHURCHES

Detailee

MARY D. ROBERTSON

Chief Clerk

ADAM HENDERSON

Professional Staff Member

HENRY J. KERNER

Staff Director and Chief Counsel to the Minority

MICHAEL LUEPTOW

Counsel to the Minority

ELISE MULLEN

Research Assistant to the Minority

BENJAMIN DRISCOLL

Law Clerk

ELIZABETH FRIEDRICH

Law Clerk

JACOB ROGERS

Law Clerk

MEGAN SCHNEIDER

Law Clerk

ALEX ZERDEN

Law Clerk

Former Subcommittee Staff Who Contributed

ANDREW DOCKHAM

Counsel to the Minority for Senator Tom Coburn

DENNIS BOGUSZ

Congressional Fellow

ELENA BEGUNOVA

Law Clerk

GIGI GOOD

Law Clerk

THARUNI JAYARAMAN

Law Clerk

JULIE KOVIN

Law Clerk

LANE POWELL

Law Clerk

DYLAN TEGGERT

Intern

DORIS WEIL

Law Clerk

Learn more:

/legalnewsroom/financial-fraud-law/b/blog/archive/2013/12/19/10-in-financial-fraud-law-for-the-year-is.aspx.   

Contact the author at smeyerow@optonline.net. 

For more information about LexisNexis products and solutions connect with us through our corporate site.