International banking secrecy was delivered a massive blow on Monday, when Swiss banking giant and refiner Credit Suisse pled guilty to tax evasion and accepted a $2.6 billion penalty.
Swiss banks, notorious for helping wealthy investors hide their money from the U.S. government, are nearly synonymous with “discretion.” This charge blows the lid off that reputation, though the New York Times reports that the bank will not disclose the names of American account holders, citing Swiss law.
The terms of the deal state that the bank will plead guilty to one count of conspiring to aid tax evasion, will pay the penalty, fire three employees found to be involved, and will hire an independent monitor for up to two years.
However, the Justice Department ensured that the bank won’t collapse as a result of the charges by waiting until U.S. markets closed to announce the deal. They also issued a temporary exemption from a federal law requiring a bank hand over its investment-advisor license. These penalties and concessions were worked out between Credit Suisse and federal prosecutors before the deal was announced.
U.S. Attorney General Eric Holder said, “This case shows that no financial institution, no matter its size or global reach, is above the law.”
Though there are understandable fears that this plea agreement will cause American investors to flee the bank, those damages are expected to be minimal. According to the New York Times: “The plea is expected to lead at most a handful of pension funds and other clients to cut ties to the bank.”
Besides, there may not be many other choices: French bank BNP Paribas is next in line for a plea deal for doing business with U.S.-blacklisted countries like Sudan, and it’s possible American banks JPMorgan Chase and Citigroup are in the sights. More is likely to come in light of H.R. 2847. (Read our post discussing the effects of H.R. 2847.)
This case marks a distinct shift in tactics against financial corporations, which got a notoriously light treatment after the 2008 financial collapse. The evasion at Credit Suisse is thought to go back more than a century, with secret accounts, sham corporations, and a common practice of destroying account records.
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