Swiss international banking giant Credit Suisse has at last reached a settlement over giving tax evasion advice to US taxpayers.
The Credit Suisse affair was one of the touch papers that led to the controversial Foreign Account Tax Compliance Act (FATCA) that is due to start on July 1.
The US Department of Justice alleged that Credit Suisse and several other Swiss banks secretly helped tax cheats hide their income and investments from the Internal Revenue Service (IRS).
From investigating the affair, the US developed FATCA, which requires offshore banks to report the financial details of any US taxpayer holding a bank account or investments worth more than $50,000.
To settle the matter and to keep a US banking licence, Credit Suisse must pay a £1.66 billion fine.
The penalty brings the US Department of Justice inquiry to a close and allows Credit Suisse to keep trading in the lucrative US market.
Banking secrecy
FATCA had led to Switzerland pulling back the veil of secrecy over banking matters and resulted in the payment of billions of pounds in fines, back tax and penalties not only to the US, but also the UK, France and Germany.
As a result, Switzerland has also signed a FATCA pact with the US to automatically hand over the details of US banking and investment customers to the IRS each year.
Brady Dougan, the Credit Suisse chief executive, said: “The bank regrets any past misconduct. Resolving this dispute is an important step for us.”
During the dispute with Swiss banks, the US Department of Justice has threatened to arrest bankers in the US and Switzerland’s oldest private bank, Wegelin, closed for good in January 2013 after being fined £36 million for aiding tax cheats
More nations sign up for FATCA
Meanwhile two more former tax havens have signed FATCA deals with the US government.
The Liechtenstein government explained that signing up to FATCA was imperative to maintain the state’s access to the US money markets. Financial services are the mainstay of the Liechtenstein economy.
Like Switzerland, the tiny European nation avidly defended the anonymity of banking and investment clients, but signing up to FATCA and taking part in a tax disclosure agreement with Britain has brought the state’s financial industry in from the cold.
Gibraltar has also signed a FATCA tax information sharing agreement with the US government.
The US government’s FATCA online portal for foreign financial institutions is also due to close soon. The portal is for financial institutions in countries without a FATCA agreement with the US to comply with the new law by passing customer information directly to the IRS. Around 770,000 financial institutions around the world are expected to subscribe to the portal.
