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US Probes Credit Suisse for Aiding Tax Evasion

Swiss bank Credit Suisse said on Friday it is being probed by the U.S. Department of Justice as part of a broader investigation into banks suspected of helping Americans evade taxes.

Credit Suisse
Sharon Lorimer
Credit Suisse

Credit Suisse said in a brief statement it had received a letter on Thursday notifying the bank that it was a target of a DoJ investigation concerning "historical private banking services provided on a cross-border basis to U.S. persons".

In a major blow to the banking secrecy that helped Switzerland build up a multi-trillion-dollar offshore banking industry, Credit Suisse's local rival UBS paid a fine of $780 million in 2009 and agreed to hand over information about nearly 5,000 secret accounts held by U.S. citizens to settle U.S. charges it aided tax evasion.

Four current and former Credit Suisse bankers were charged in February with aiding Americans to dodge taxes, but the bank said then that the institution itself was not a subject of the investigation and that it was cooperating.

"Subject to our Swiss legal obligations, we will continue to cooperate with the U.S. authorities in an effort to resolve these matters," Credit Suisse said on Friday.

Offshore tax havens have come under heavy attack in recent years as cash-strapped governments seek to boost revenues in the wake of the financial crisis, forcing countries like Switzerland to pledge to cooperate more to help hunt tax cheats.

A recent report from the Boston Consulting Group said wealthy U.S. individuals had pulled most of their money from Swiss private banks since 2006 in the wake of the crackdown.

Since settling with UBS, the DoJ has been conducting a broad investigation into a number of Swiss banks, bankers, and intermediaries to see if they have helped clients dodge taxes.

Companies involved in that probe include Credit Suisse, the second-largest bank in Switzerland.

HSBC Europe's largest bank; Julius Baer, a private bank based in Zurich; and Basler Kantonalbank, a Swiss cantonal bank.

Swiss Seek Deal To Get Probe Dropped

Switzerland and the United States have been in talks to try to reach a multibillion-dollar deal to get that investigation dropped in return for the banks paying a fine, exiting their undeclared offshore banking businesses for Americans, and turning over client names to the Internal Revenue Service (IRS).

But those talks have become bogged down due to Swiss insistence that any deal leave Swiss bankers free from prosecution in the United States, sources said last month.

A spokesman for the Swiss finance department said on Friday the ministry had taken note of the Credit Suisse investigation.

Vontobel analyst Teresa Nielsen said Switzerland and the United States were likely to continue negotiations along with the DoJ investigation of Credit Suisse.

"Currently it is difficult to say whether this will lead to a legal case and a fine against Credit Suisse," Nielsen said.

Credit Suisse shares were down 1.4 percent at 1034 GMT, underperforming a 0.2 percent fall in for the European banking sector. Julius Baer shares were down 0.1 percent.

A spokesman for Julius Baer, which agreed in April to pay 50 million euros to settle a German tax investigation, said the bank had not been contacted by the DoJ so far. Basler Kantonalbank was not immediately available for comment.

Jay Rubinstein, Zurich-based partner and head of U.S. tax at law firm Withers, said: "It is a shame the U.S. is focusing on the Swiss institutions, as the present trend in Switzerland is towards compliance and transparency.

"But it is not surprising that the U.S. justice department is focusing its efforts on institution(s) with presence in the United States, given the leverage." In June, the U.S. Internal Revenue Service's Deputy Commissioner for Services and Enforcement Steven Miller said it planned to move against "one or more banks in the next month or so".

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