Whistleblowers claim Credit Suisse helped wealthy Americans evade U.S. taxes for years

Earlier this month, UBS Group took over the collapsed Swiss bank Credit Suisse as part of a hastily arranged bailout, bringing about a new set of regulatory and legal issues for its new owners as a result.

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Despite being caught and prosecuted for doing the same thing over a decade ago, Credit Suisse has provided a safe haven for wealthy American clients for years to hide assets from the IRS — even though it has been doing so for years. These two former bankers, who are now working with the US government as whistleblowers.

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In 2014, the bank pleaded guilty to criminal charges related to the criminal concealment of offshore assets and income for thousands of U.S. citizens. As part of the plea deal, it admits that it used sham entities, destroyed account records, and personally delivered cash to American clients so as to evade IRS detection - agreeing to crack down on U.S. tax dodgers going forward, as part of its plea agreement. There were also a number of reforms that Credit Suisse agreed to at that time, including disclosing its cross-border activities and cooperating with the authorities when they request information about its activities.

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This agreement appears to have been violated by the now troubled bank, according to a new report that was released by the Senate Finance Committee in which the committee details ongoing abuses that have taken place since then. In a report released on Wednesday, the panel details the findings of its two-year investigation and these findings take on greater urgency in light of the looming banking crisis. In an effort to keep Credit Suisse afloat earlier this month, the Swiss National Bank, the country's central bank, injected more than $100 billion of liquidity into the bank, and the Swiss government agreed to provide UBS with about $9 billion to cover the losses that resulted from the takeover.

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‘Still ongoing’

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Several Senate investigators say the latest revelations raise questions about how much American money still remains hidden inside the vaults of a bank that collapsed last year, shaking the foundations of the global financial system to the core.

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Using its findings in the report prepared by the committee’s Democratic staff, the Senate report accuses the bank of violating the terms of its 2014 plea agreement, which when enforced by the Justice Department could result in a host of negative consequences for the bank. In terms of potential liability, it is unclear how much UBS may be liable for as a result of the report, but a lawyer for the whistleblowers has argued that the bank might have to pay up to $1.3 billion in damages.

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In an interview with the Associated Press this week, Senator Ron Wyden, a Democrat from Oregon, said his committee had received new information just this week from Credit Suisse about additional undisclosed American accounts that the bank held after 2014.

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"The investigation is still ongoing, as of just the last couple of days - even more money has been found to have been hidden, and there are very substantial issues in this case," Wyden asserted. "As I see it, now is the time for prosecutions and penalties that will send a strong message to the perpetrators."

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"The employees of Credit Suisse aided and abetted an extensive criminal tax evasion scheme," said a finance committee aide, who asked not to be identified because the report hadn't been released yet. Until now, no Credit Suisse employees involved in the scheme have been charged with any crime by the United States government as a result of their involvement in the scheme.

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Hiding fortunes

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The senators say they have discovered that Credit Suisse was able to hide fortunes totaling more than $700 million in the bank after its plea agreement with the government, enabling as many as 25 American families to hide their fortunes.

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"Basically, they thought that if they got away with it, they would be able to get away with it, and they did," the aide stated. "The question is not whether Swiss banks will continue to do this in the future, but rather whether Swiss banks will continue to do this in the future."

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According to a spokesperson for Credit Suisse, the company is against all forms of tax evasion.

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As the spokeswoman explained, the report primarily identifies legacy issues, some of which were in place more than a decade ago, and we have made extensive improvements since then in order to find individuals who are trying to hide their assets from the IRS. She asked not to be identified because she was not authorized to speak on the record. As she explained, the new leadership team at the bank has been cooperating with the committee throughout the process. A number of Credit Suisse employees have supported Senator Wyden's efforts, including suggestions for policy solutions that would enhance the ability of the financial industry to detect undeclared Americans. She said the bank's policy requires it to close undeclared accounts as soon as they are identified and to discipline employees who do not follow it.

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As whistleblowers to the U.S. government and Senate investigators, the two former Credit Suisse employees who spoke to CNBC said that some of the bad behavior continued long after Credit Suisse pleaded guilty and reached a plea agreement with the government in 2014. CNBC agreed to mask their identities on camera and to maintain their anonymity because they are afraid that the bank might retaliate against them. Prior to the collapse of Credit Suisse earlier this month, they were interviewed by the media.

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After the bank's 2014 plea agreement, it was revealed that many American accounts were closed, but some bankers knowingly maintained certain Americans at the bank by changing their nationalities on their accounts and ignoring evidence that the account holders were Americans, even after the bank had disclosed and closed many American accounts. Moreover, the whistleblowers allege that they helped American clients move money from one bank to another without ever reporting the transfers to the U.S. government.

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‘Tremendous pressure’

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It is a rare opportunity to see into the inner workings of the Swiss banking system, a world that is kept secret from the public eye, and a world that is rarely penetrated by outsiders. These documents show how, in the years prior to Credit Suisse's collapse this month and its rescue by the Swiss government and a rival bank, UBS, regulatory compliance systems had crumbled within the bank itself.

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The whistleblowers said there is constant pressure on bankers to keep and bring in deposits at the bank despite being under constant pressure to do so.

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"You are under tremendous pressure to bring in net new assets, which in turn translate into revenue," said the first whistleblower, who described an environment in which bankers were expected to keep the assets of wealthy clients in the bank, even if they had to cheat in order to do so. "As a result, that's why there was fraud in the first place. The last thing you want is to lose your assets. So, what you do is that you try to keep them in any way, form, or manner in which you can."

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The senior executives of the bank would call out individual bankers at quarterly meetings and read out the asset numbers for each banker during the meeting. The second whistleblower said that if a banker's number declined, “you would be exposed in front of your colleagues.” And as a result, he said, "there may come moments where people simply refuse to tell the truth."

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I believe that 'Don't Ask, Don't Tell' might be the best way to explain as to why this happened," he said. "They would have clients that are American citizens, but they would switch their passports around so that they would appear to be someone else, and they would flag themselves as a foreigner."

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Investigators from the Senate have found that Credit Suisse bankers, for example, routinely flew to Miami to meet with American clients, yet failed to identify them as U.S. citizens before meeting with them, the investigation found.

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Apparently, secrecy drives the entire Swiss banking industry - to the point that the industry may not survive without it if there is no secrecy in the industry.

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"The Swiss banks are far more expensive than other banks, and there is a reason for that," he said. "There are many places in the world that you could choose from if you wanted to be there. But why should you pay more to be there? What is the point of being in a place that underperforms in terms of your return on assets? ”

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The first whistleblower asserted that "there's no other reason to be there" if a client isn't using Switzerland to conceal assets.

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‘Congratulation!!!!!’

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The extent to which bankers went to conceal their identities and ensure that wealthy Americans might change their nationalities, at least for the sake of the bank's internal record-keeping, is revealed by emails obtained by the Senate Finance committee.

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"Please don't write or document these issues," a banker at Credit Suisse asks in one email to another bank employee.

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An American client who was the heir to a $200 million fortune deposited at Credit Suisse wrote to the company via email to announce their decision to renounce their citizenship.

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"I tried to get in touch with you. Congratulations!" their personal banker replied via email. "I know this was not an easy step for you, but it's a big one."

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The privileged heir retorted, "Thanks. Hopefully, this will also make Credit Suisse more at ease right about now."

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The heir added a smiling face to the message's end.

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The Family

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According to a committee aide, "the committee's investigation uncovered major violations of Credit Suisse's plea agreement, including an ongoing and possibly criminal tax conspiracy involving almost $100 million and undeclared offshore accounts belonging to a family of dual U.S./Latin American citizens."

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The aide claimed Credit Suisse closed nearly $100 million worth of accounts held by that family in 2013 and transferred the money to other banks in Switzerland and elsewhere, but it didn't notify American authorities of the transfer of assets until 2021, months after whistleblowers had alerted American authorities to the accounts' existence.

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The clients are alluded to in the Senate report as "The Family," not by their names.

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Although it is permissible for Americans to have money in foreign bank accounts, they are required to report the assets to the IRS and pay taxes on any corresponding earnings. 

Americans are required to file a disclosure form known as a Report of Foreign Bank and Financial Accounts, or "FBAR," as it is known in the business.

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The committee found evidence that Credit Suisse bankers visited family members in Miami as early as 2000, holding meetings at the Mandarin Oriental hotel and dining at the Capital Grille restaurant in the city's posh Brickell neighborhood overlooking Biscayne Bay. The committee claimed that the family had assets at Credit Suisse dating back to 1979.

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However, the family's aides claim they couldn't uncover any proof that they ever submitted the necessary paperwork to the American government or paid taxes on their possessions. Instead, the assets were held under the dual Latin American passport of one family member.

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Legal jeopardy

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"To put it mildly, they could be in legal peril," the aide said.

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A senior Credit Suisse executive in its Latin American branch, who attended the meetings in Miami, was allegedly in charge of managing the family's funds, according to committee aides. This is significant, according to the official's aides, because that individual was in charge of numerous other Credit Suisse bankers who had already been charged in relation to the 2014 American offshore accounts.

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Committee assistants stated that Credit Suisse refused to give the names of any of the participating workers or the Swiss institutions that received the payments, despite the fact that they claimed to have been able to find that information through other means.

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A Senate aide remarked that the Miami issue "is not small potatoes." If confirmed, it "would be one of the largest FBAR violations in United States history."

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The DOJ should recoup the hundreds of millions of dollars in fines that the bank committed to pay in 2014 but ultimately did not have to pay, according to whistleblower attorney and former Justice Department prosecutor Jeffrey Neiman. He believes that fraud is still going on. The bank made a $2.6 billion payment, although a federal judge only assessed a $1.3 billion fine at the time.

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"I believe Credit Suisse is aware of Americans who are now concealing money. And, in my opinion, the bank is making every effort to minimize any harm caused, Neiman added.

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$1.3 billion

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"The American taxpayers must receive at least that $1.3 billion from the US government. Making an example of this bank is necessary," he declared. "The Justice Department has been talking tough about holding repeat corporate violators accountable. Let's examine the meaning of those words."

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If more payments are made to the US government, the whistleblowers stand to profit financially. According to the statute, those who come forward with information that leads to financial recovery by the U.S. government are eligible to receive 15% to 30% of that money.

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According to the aide, the Senate Finance Committee does not believe that U.S. prosecutors have gone far enough in holding Credit Suisse responsible. The recent takeover of the bank places it front and center in the report's push to increase pressure on the DOJ to take action against the Swiss bank.

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"DOJ must tighten up its loose control over Credit Suisse and hold Credit Suisse responsible for any violations of its plea agreement," he said.

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The assistant referred to recent signs of a white-collar crackdown. The assistant stated, "DOJ said we would go after anyone at banks who commits tax evasion. Do it now. In this report, we'll reveal twelve identities to you. Chase them after them."

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When approached for this article, the Justice Department opted not to comment.

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‘Never say never’

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When UBS acquired Credit Suisse on March 19 in an emergency government-brokered acquisition, it's unclear what obligations, if any, it may have assumed for everything. Although a person familiar with Credit Suisse's thinking claimed UBS executives are aware of the situation, it is unclear how much of this potential legal cloud was conveyed to UBS prior to its acquisition of Credit Suisse.

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Requests for comment from UBS representatives went unanswered for this article.

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It is "disquieting," according to a source familiar with Credit Suisse's thinking, for the Senate Finance Committee to publish its report at the same time that international authorities are working to support the global banking system by facilitating the sale of Credit Suisse to UBS. The person said, "The financial services industry and its importance to the global economy have become blatantly obvious to everyone."

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"I don't believe there is anything there that could be defined in this way," the person replied when asked if he could guarantee with certainty that there is no undeclared American cash in the bank right now. He claimed that although Credit Suisse had looked into the matter, it had not discovered any other suspicious accounts. "I don't think there's anything there."