13 banks in spotlight after Credit Suisse penalty in US tax probes

13 banks face rising stakes after rival lender's guilty plea marks watershed in American crackdown on offshore evasion

PUBLISHED : Tuesday, 27 May, 2014, 1:34am
UPDATED : Thursday, 29 May, 2014, 6:01pm

Thirteen Swiss banks face rising stakes in criminal tax evasion probes after Credit Suisse Group set a new standard for punishment in the United States crackdown on offshore tax evasion.

Julius Baer Group, Zuercher Kantonalbank and the Swiss unit of HSBC Holdings are among those seeking to avoid pleading guilty to helping Americans cheat the Internal Revenue Service - an unprecedented step taken by Credit Suisse on May 19.

Their degree of wrongdoing and cooperation with investigators would help decide their fate, said the top US tax prosecutor.

"We will look at the facts and circumstances of each investigation to determine an appropriate penalty," Assistant Attorney General Kathryn Keneally said. "It should be very clear from the Credit Suisse investigation that cooperation, or the lack thereof, is an important factor."

The guilty plea by Credit Suisse's main bank subsidiary and US$2.6 billion penalty last week marked a watershed in a campaign that has led to charges against more than 100 people since 2009. Another 100 or so Swiss banks and 43,000 US taxpayers applied to the justice department to avoid prosecution by disclosing in detail how the evasion worked.

The data, compiled by the IRS, has strengthened the US hand against the 13 banks.

With the Credit Suisse case over, the pace of the remaining cases would quicken, the Swiss finance minister said last week.

"It looks like [the justice department] has a plan in certain cases where [it] can get a guilty plea but not destroy the bank," said Mark Matthews, a former IRS deputy commissioner. "I'm sure any bank confronted with that can hardly take comfort."

Prosecutors have already charged taxpayers or bankers in cases implicating Julius Baer, the third-largest Swiss wealth manager; Zuercher Kantonalbank, the biggest Swiss publicly owned regional bank; and Mizrahi Tefahot Bank and Bank Leumi Le-Israel, two Israeli banks with Swiss units.

Two Julius Baer bankers were charged in 2011 for practices similar to what Credit Suisse admitted and three ZKB bankers were indicted in 2012. Several clients of Leumi and Mizrahi have pleaded guilty, and dozens of bank customers have helped the government investigation.

Beny Shoukron, a Mizrahi spokesman, and Leumi spokesman Lee Neumann declined to comment on the probe.

The 13 Swiss banks vary in size and scope of business, with only HSBC having substantial operations in the US. Like Credit Suisse, HSBC could seek the blessing of regulators to operate in the US if it pleads guilty. The smaller banks without a US presence could lose the ability to engage in US dollar clearing if they are charged or plead guilty.