Although an offshore tax evasion investigation may be more alarming to an individual taxpayer, federal authorities also routinely target large financial institutions such as banks. Credit Suisse Group AG, one of the world's largest banks, is the most recent target of federal criminal probes into possible tax evasion.
The bank was recently informed by federal prosecutors that it is the formal target of a criminal investigation. The investigation focuses on Swiss banks that allegedly facilitate tax evasion schemes by taxpayers in California and throughout the United States. United States citizens must pay taxes on their worldwide income, which is why some taxpayers flock to countries with strict banking privacy rules in order to hide assets.
The criminal probe launched against Credit Suisse may force the Swiss government to reform its secretive banking laws. The probe is also a problem for the bank because no bank in the United States has successfully combated criminal charges. Credit Suisse faces data disclosure requirements and a potential fine of up to $1 billion, according to some sources.
UBS, another large Swiss bank, was forced to pay a $780 million fine and disclose client data for 4,000 United States-based clients in prior rounds of this growing investigation.
"Clearly the U.S. government is using the UBS investigation and settlement blueprint in the current Credit Suisse probe," said a former U.S. prosecutor.
Credit Suisse shares dropped in response to news of the probe. California residents who are hiding assets with Credit Suisse may decide to take advantage of the Offshore Voluntary Disclosure Initiative, which we have discussed in previous posts. The first program caused 15,000 individuals to step forward and generated $400 million in tax revenue for the IRS.
Source: The Wall Street Journal, "Credit Suisse Is 'Target' of Inquiry," Deborah Ball, Laura Saunders, Thomas Catan, 7/16/11