As many as 13 Swiss banks are facing an increasing stake related to criminal tax avoidance probes after another Swiss bank, Credit Suisse Group AG (NYSE: CS), put new standards for punishment in US crackdown on evasion of offshore taxes.
Punishment to fit crime
Zuercher Kantonalbank, Julius Baer Group Ltd. and the Swiss branch of HSBC Holdings Plc (NYSE: HSBC) are included among the banks, which seek to avoid a guilty plea for assisting US citizens so that they can swindle the Internal Revenue Service. According to US prosecutors, the degree of cooperation and wrongdoing with the concerned investigators will help to decide the consequences.
According to Kathryn Keneally, Assistant US Attorney, the circumstances and facts of individual investigation will be looked at to reach a penalty appropriate for the concerned bank. The investigation will take into account the cooperation or lack of it by specific banks and will constitute a crucial factor.
A penalty of $2.6 billion and a guilty plea by the main subsidiary of Credit Suisse in the fourth week of May was a campaign milestone that led to placing charges against about 100 individuals since 2009. Around 43,000 US taxpayers and 100 Swiss banks also sent an application to Justice Department to avoid prosecution. The process involved a detailed disclosure of the techniques of the evasion. The IRS compiled data has made the US case stronger against the concerned 13 Swiss banks. According to Finance Minister of Switzerland, the ending of the Credit Suisse case will hasten up the pace of remaining cases.
Proceeding according to plan
Mark Matthews, tax attorney and former deputy commissioner in the IRS, said that the Department of Justice is proceeding according to a plan where a guilty plea can be obtained without destroying the bank. Prosecutors have charged bankers or taxpayers in the cases that involve Julius Baer, Zuercher Kantonalbank, Mizrahi Tefahot Bank Ltd and Bank Leumi Le-Israel Ltd. The last two are Israeli banks with functioning units in Switzerland.
The prosecution of Credit Suisse had led to charging two Julius Baer bankers in 2011 along with three bankers employed in ZKB in 2012. A number of Mizrahi and Leumi clients have plead guilty while several customers have assisted the investigation mounted by the government.
The Swiss banks under the scanner are of varied businesses and sizes. Only HSBC among them has substantial US operations. HSBC, similar to Credit Suisse, may seek the support of regulators to continue its US operations, in the case of a guilty plea.