US Says “CS Helped Americans Evade Taxes Until Recently”… UBS Likely to Be Held Responsible

Swiss investment bank Credit Suisse (CS), which was acquired by UBS after a liquidity crisis, has been found to have assisted Americans in tax evasion until recently. The U.S. Senate Finance Committee reached this conclusion based on whistleblowing by former CS executives and investigations, leading to analyses that UBS, the new owner of CS, may face additional regulations and legal issues.

[Image source=AP Yonhap News]

According to CNBC and The Washington Post (WP), the U.S. Senate Finance Committee released a report with these findings on the 29th (local time). Following a roughly two-year additional investigation into CS, which had been under investigation by the U.S. Congress and Department of Justice in 2014 for assisting Americans in tax evasion, it was confirmed that such illegal activities continued until recently. Two former CS executives participated as whistleblowers in this investigation.

The investigation revealed that CS supported Americans with dual citizenship in transferring over $100 million to offshore accounts. Additionally, more than 23 accounts owned by Americans, with over $20 million not reported to tax authorities, were identified. It is estimated that the amount hidden by Americans at CS is at least $700 million. Ryan Carey, spokesperson for the Senate Finance Committee, explained that since the exact amount has not been confirmed, "it could be even more."

Senate Finance Committee Chairman Ron Wyden stated, "In 2014, CS executives pledged to cease deceiving the U.S., which led to reduced fines related to tax evasion charges at the time," and added, "This investigation shows that CS did not fulfill that promise." Former CS executives who cooperated with the investigation confirmed that they supported tax evasion by changing the nationality registered on accounts and collaborating with clients.

Notably, these facts came to light after UBS decided to acquire CS with support from Swiss authorities, drawing even more attention. The U.S. Senate report points out that the company acquiring CS must bear full responsibility for CS’s violations. Previously, CS admitted to assisting Americans in tax evasion through secret offshore accounts in 2014 and was fined approximately $2.6 billion. However, by disclosing offshore transfer activities and agreeing to cooperate with U.S. authorities’ requests and account closures, the fine was reduced to $1.3 billion at that time.

Accordingly, U.S. media estimate that UBS, as the new owner, may have to pay fines ranging from $1 billion to $1.3 billion due to the newly confirmed allegations of CS’s support for tax evasion. CNBC reported, "UBS will face new regulatory and legal challenges." WP evaluated that "this could become another headache in the merger process between UBS and CS."

Meanwhile, UBS, Switzerland’s largest investment bank, announced on the same day that it will rehire former CEO Sergio Ermotti, whose crisis management capabilities have been verified, ahead of the full-scale CS acquisition process. Ermotti, who led UBS from 2011 to 2020, is known for playing a key role as a savior through rigorous restructuring in the past.