Swiss secrecy laws hamper investigations of U.S. tax evaders

Credit Suisse General Counsel Romeo Cerutti. SOURCE: Senate Permanent Committee on Investigations

U.S. Senators are blaming Swiss secrecy laws for hampering efforts by the Justice Department to investigate and collected taxes owed by Americans who hid their money in Switzerland before 2009. 

Sen. Carl Levin (D-Michigan), Chair of the Senate Permanent Subcommittee on Investigations, said Swiss banks accused of helping U.S. customers evade taxes, such as Credit Suisse, are hiding behind Swiss secrecy laws to avoid disclosing client information to the Justice Department.

Learn More: Senate investigation details Credit Suisse’s role in “aiding and abetting” U.S. tax evasion

Levin said without the names of U.S. account holders, the United States cannot collect the unpaid taxes and hold tax dodgers accountable.

“Taxes owed on billions of dollars in hidden offshore assets remain uncollected,” said Levin. “To collect those unpaid taxes and to hold U.S. tax evaders accountable, the critical first step is to get their names.”

Levin pointed out that treaty requests to the Swiss government over the past five years have yielded the disclosure of only 238 names out of 22,000 U.S. client accounts held by Credit Suisse, most of which – about 18,900 accounts – were not reported to the IRS.

“The reason for this near total failure to date is continued Swiss insistence on bank secrecy and the United States letting them get away with it,” said Levin, who urged the Justice Department to step up enforcement of subpoenas and John Doe summons to extract more names of tax evaders from Swiss banks.

Levin cited the legal precedent established in the Bank of Nova Scotia cases that required banks in secrecy jurisdiction to comply with U.S. subpoenas if the bank conducts business in the United States.

Romeo Cerutti, General Counsel of Credit Suisse, maintained that Credit Suisse cannot fully comply with the Justice Department’s subpoenas and John Doe summons due to Swiss secrecy laws, which carry criminal charges and may result in imprisonment for improperly disclosing names of account holders.

“That’s very difficult – impossible – under Swiss law. We would all face criminal indictments in Switzerland and most probably prison terms if we would hand over these client names without the permission of the Swiss government,” said Cerutti.

Cerutti acknowledged that Credit Suisse may also be prosecuted in the United States for failure to fully comply with U.S. subpoenas.

“So you have double jeopardy. Where would you like to spend time?” asked Sen. Tom Coburn (R-Oklahoma).

“It’s a tough decision,” replied Cerutti.

Levin emphasized that Credit Suisse cannot “hide behind Swiss secrecy laws” if the bank wants to continue to conduct business in the United States.

“You’re not cooperating with us, hiding behind a law which applies in Switzerland but does not apply here, and yet you want to do business here?” said Levin. “That is not the way the international law is applied. You want to do business here, you’ve got to comply with our laws.”

Levin also called on the Treasury and the Federal Reserve to revoke Credit Suisse’s license to operate in the United States if the bank fails to follow a court order to disclose the names of non-compliant U.S. clients.

“We ought to raise the fear of God that if you’re to aid and abet violations of American law, you are not going to be allowed to operate in America,” said Levin.

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