Credit Suisse Group AG agreed to pay US$197 million to regulators and admitted servicing thousands of US clients without approval, leaving unsettled a criminal probe of whether it helped Americans evade taxes.
Credit Suisse never registered a cross-border securities business that served 8,500 client accounts between 2002 and 2008 and collected US$82 million in fees, according to a settlement with the US Securities and Exchange Commission (SEC). The accounts were valued at about US$5.6 billion in 2008.
The bank is one of 14 institutions under US criminal investigation into whether they used hidden Swiss accounts to help clients cheat the US Internal Revenue Service.
Seven Credit Suisse bankers were indicted in 2011, when prosecutors also said the bank was a target of the probe.
UBS AG, the largest Swiss bank, paid US$780 million in 2009 to settle US criminal and civil probes, admitting that it helped foster tax evasion.
“This isn’t the end game,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “The [US] Department of Justice probe can potentially result in a lot bigger fine.”
The Zurich-based lender set aside 295 million Swiss francs (US$332 million) in 2011 for US tax matters in addition to funds set apart for the commission’s case.
The US Senate Permanent Subcommittee on Investigations is set to hold a hearing on Wednesday on the status of the tax evasion crackdown, which has stalled in the Credit Suisse case.
“We are pleased to have resolved this issue with the SEC,” Credit Suisse said in a statement. “The Department of Justice investigation into tax-related issues remains outstanding, and while we continue to work to resolve this matter, the timing and outcome remain uncertain.”
Friday’s settlement includes US$82.2 million in disgorgement, US$64.3 million in prejudgement interest and a US$50 million penalty.
“As Credit Suisse admitted as part of the settlement, its employees for many years failed to comply with these requirements, and the firm took far too long to achieve compliance,” SEC enforcement division director Andrew Ceresney said in the statement. “The broker-dealer and investment adviser registration provisions are core protections for investors.”
Credit Suisse admitted to a set of facts in the commission’s administrative order, which concluded that the bank “willfully violated” securities laws. It also agreed to hire an independent consultant, according to the regulator.
“It’s been a long-running issue, something that we’ve been working hard on,” chief executive officer Brady Dougan said in a Bloomberg Television interview this month.
UBS avoided criminal prosecution in 2009 by admitting wrongdoing and handing over data on thousands of US accounts.
Since then, more than 43,000 Americans have avoided prosecution by entering an amnesty program at the IRS, paying US$6 billion in back taxes, fines and penalties.
They gave the IRS a trove of leads about offshore banks and advisers that has allowed the US to build criminal cases that were not previously possible because of the way Swiss bank secrecy shielded client identity.
More than 70 US taxpayers and almost three dozen bankers, lawyers and advisers were charged with using hidden accounts to dodge US taxes.