offshore tax evasion - credit suisse (2!26!14)

8/12/2019 Offshore tax evasion - Credit Suisse (2!26!14)

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LEGACYU.S.SWISSTAXISSUES

STATEMENTOF

CREDIT

SUISSE


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Statement of Credit Suisse

United States Senate

Permanent Subcommittee on InvestigationsCommittee on Homeland Security and Governmental Affairs

February 26, 2014

Executive Summary

Since the Permanent Subcommittee on Investigations first highlighted abuSwiss banking secrecy in 2008, Credit Suisse has been working hard to helpabout the transformation of the Swiss banking system, moving from secrec

transparency, with the objective of meeting the highest standards and best

of banks anywhere in the world. Among other steps, we have strongly sup

the Foreign Account Tax Compliance Act (FATCA) in the United States an

Switzerland.

We acknowledge that Swiss banking secrecy laws have historically been vuto abuse and were in fact abused by U.S. taxpayers. But at Credit Suisse, wbuilt a business culture where hiding income and assets of U.S. clients is ab


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Introduction

Good morning Chairman Levin, Ranking Member McCain, and Members of thSubcommittee. My name is Brady Dougan, and I have been the CEO of Credit Suisse 2007. I am here today with Romeo Cerutti who has been the General Counsel of Credisince 2009, and Hans-Ulrich Meister and Rob Shafir who have been co-heads of the PrBanking & Wealth Management Division since 2012. Thank you for the opportunity tbefore you today. On behalf of Credit Suisse, we look forward to answering your questhis important topic.

Credit Suisse is a global financial services company with operations in more thacountries and over 45,000 employees including approximately 9,000 U.S. employees inlocations. In the United States, Credit Suisse is a Financial Holding Company regulateFederal Reserve. The Bank has a New York branch, which is supervised by the New YDepartment of Financial Services, and we have three regulated U.S. broker/dealer subsOur primary U.S. broker/dealer has been designated a Systemically Important FinanciaInstitution under the Dodd-Frank law. We have a substantial business presence here inUnited States.

The Credit Suisse management team has a strong personal commitment to the U


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worked closely with the United States Senate and the IRS to make the law as effective possible.

Credit Suisse has repeatedly and publicly supported the principle that banks havobligation not to knowingly assist clients in hiding income and assets. We reaffirm thatoday. Seeking out customers who want to hide income and assets from their home couand profiting from these assets is simply not acceptable. We believe we have been a fogood in helping to develop a different and better legal and cultural reality for the Swprivate banking model.

We appreciate this Subcommittees important role in advocating change, and wthe work of both Congress and the Administration toward greater transparency in internbanking.

It is also important to acknowledge that Credit Suisse has made substantial progtaking responsibility for past problems and resolving them in an appropriate way. LastCredit Suisse reached an agreement with the United States Securities and Exchange Co(SEC) that concluded the SECs investigation into the related issue of investment advic

provided by Swiss-based private bankers to U.S. clients. As you know, Credit Suisse hbeen cooperating with the U.S. Department of Justices ongoing investigation of histor


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resident clients, some other Swiss banks welcomed them. But Credit Suisse improhibited the transfer of assets fromthose former UBS clients to our Bank.

Results. Credit Suisse has done the complex, demanding work of identifying Uaccount relationships and then either closing accounts or requiring that clients ecompliance with U.S. tax laws. We consider our five-year voluntary program asignificant achievement. We have documented the full effort invested in our reprogram in presentations to the Subcommittee staff.

Credit Suisses Internal Investigation. When Credit Suisse learned of possiblewrongdoing at the Bank, we commissioned an independent internal investigatiohighly respected U.S. and Swiss law firms. The investigation was broad and delooking at employees from line-level private bankers to executive managementcounsel searched more than 10 million documents and conducted more than 100interviews. We are committed to fully cooperating with U.S. authorities, and wpresented the Subcommittee with the unvarnished results of our internal investiThe evidence from that investigation showed improper conduct centered on a gprivate bankers within a desk that focused on larger U.S. resident accounts. Cr

takes very seriously the historical problems of tax evasion by U.S. account holdproviding unlicensed securities advice in the United States. We deeply regret th


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Policies, Procedures, & Training

Even though private banking services to U.S. clients were a small portion of CrSuisses overall Swiss-based private banking business, compliance with U.S. law has lofocus. Years before learning that any investigation of Swiss banks was on the horizon,Suisse set up a compliance program with best-in-class policies that were regularly updaBank also conducted training of private bankers, and undertook audits to monitor comphindsight, it is apparent that some Swiss-based private bankers with U.S. clients skirtedBanks controls, and concealed their violations of policy from Credit Suisse executivemanagement. While Credit Suisse deeply regrets and takes responsibility for those vio

those actions should not overshadow the Banks ongoing commitment and consistent dto compliance with U.S. law.

As early as 2002, Credit Suisse put a series of policies in place to address servicprovided to U.S. clients by Swiss-based private bankers. These policies were drafted blawyers and regularly updated. The Bank trained its employees on these policies and remployees to adhere to them.

In November 2002, Credit Suisse adopted a detailed policy regardingrelationships with U.S. persons and external asset managers. This polic


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investment adviser. Credit Suisse required CSPA clients to waive Swiss banking secreDuring this period, the Bank was actively encouraging its U.S. account holders with U.

securities to transfer from the Swiss Private Bank to CSPA. A timeline reflecting the Bcompliance efforts is attached.

Exit of U.S. Relationships

Following our decision to prohibit former U.S. clients of UBS from transferringassets to Credit Suisse, in August 2008, Credit Suisse promptly turned to addressing isshighlighted by the UBS situation. In October 2008, Credit Suisse decided to allow rela

with non-U.S. entities that had U.S. beneficial owners only if they demonstrated U.S. tacompliance. We hired a leading Swiss law firm to review the tax status of U.S. clients wanted to remain. By the end of the first year of review, all but 135 relationships with over $10,000 had been reviewed and resolved.

In April 2009, we extended our review to U.S. resident clients. Credit Suisse trvirtually all U.S. resident accounts to one of the Banks U.S.-registered affiliates, or terthe relationships. Credit Suisse simply shut down those client relationships that were u

to move or that did not meet the $1 million requirement for transfer to the Banks U.S.-affiliates. By the end of the first full year of review, 2010, we had reviewed and resolv


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In any event, the Subcommittee assumes that every U.S. client account held abrundeclared. As discussed below, that is a demonstrably inappropriate assumption.

Moreover, U.S. Treasury Department regulations required U.S. citizens to reporaccounts only if the balance exceeded $10,000 at some point during the year. While thSubcommittee staff has mentioned 22,000 accounts, more than 8,300 had balances belo$10,000 as of December 31, 2008.

Troublingly, these estimates also lump in categories of accounts where there is reason to believe that the client had a valid reason for holding a Swiss account. For ex

Subcommittees estimates of undeclared accounts include approximately 6,400 accouby all U.S. expats who would ordinarily have a need for some form of local banking seoutside of the U.S. Again, it should not be ignored that most expats resided in Switzerltherefore had a particularly valid reason for maintaining a bank near their homes.

Finally, each of the three methodologies that the Subcommittee staff has raiseproblematic for different reasons:

The first method wrongly suggests that the number of accounts closed during thExit Projects may be a proxy for undeclared accounts. The Banks Exit Projectsh U S li l f h B k f i F l C di S i d id d


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The investigation did not find any evidence that senior executives of Credit Suithese bankers were apparently helping U.S. customers hide income and assets. To the

the evidence showed that some Swiss-based private bankers went to great lengths to ditheir bad conduct from Credit Suisse executive management.

Cooperation with U.S. Authorities

Credit Suisse has consistently cooperated with the investigations led by the Depof Justice, the SEC, and this Subcommittee, going to the greatest extent permissible by to provide information to investigating U.S. authorities.

Since early 2011, Credit Suisse has produced hundreds of thousands of pages odocuments, including translations of foreign-language documents. Our representativeswith the Department of Justice to help them understand the information we provided andescribe the findings of our internal investigation and the Banks various compliance eCredit Suisse has also provided briefings to officials from the U.S. government, includSEC and this Subcommittee. That includes more than 100 hours briefing the Subcommon details of the private banking business and the internal investigation and thousands m

hours answering written questions from Subcommittee staff. Specifically, Credit Suissproduced over 580,000 pages of documents, provided 11 detailed briefings to the Subc


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Efforts To Facilitate Information Disclosure

Credit Suisse has also worked at the highest levels of the Swiss and Americangovernments to bring about reforms that would improve transparency and make coopereasier.

In Switzerland, Credit Suisse representatives have been engaged with senior Swofficials for several years regarding U.S. tax matters. Senior Credit Suisse executives happeared at parliamentary hearings in Switzerland to support a broad and complete resoU.S. tax issues, and Credit Suisse directors and executives have spoken out in favor of

U.S. tax issues in newspaper interviews and other public statements.

In the United States, the Bank has advocated on behalf of the revised Protocol tDouble Taxation Treaty with Switzerland. The treaty was signed in 2009 and was appthe Swiss Parliament in 2010. It has been awaiting ratification by the United States Semore than four years. Credit Suisse has consistently urged Senate staff and Senators toratification throughout that period. Credit Suisse has met multiple times with the leadethe Foreign Relations Committee, Senators on the Foreign Relations Committee and th

and other Congressional personnel to encourage ratification.

C di S i l bli l d h d i l i f FAT


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internal policy. The Swiss law firm Schellenberg Wittmer and the U.S. law firm SimpThacher & Bartlett, are conducting that review.

The Subcommittees suggestion, however, that multiple management and accouofficials at Credit Suisse did not follow the Banks policies regarding NNA recognitionaccurate. Nor is it supported that the U.S. banker responsible for Client 5s account NNA-related concerns that were not appropriately resolved in a timely way. And finalBanks senior finance official with responsibility for NNA confirmed, based on all infohe has learned to date, that he remains comfortable with his NNA determinations for C2012.

Conclusion

In closing, we would like to reiterate the following:

Credit Suisse is supporting the transformation of Swiss banking. We have builtbusiness culture where knowingly holding unreported assets of U.S. clients is aunacceptable, and we are committed to a culture of respect for U.S. laws.

On our own initiative, Credit Suisse has taken proactive steps to require that onU S li h bli h li i h U S l b li f B k


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TIMELINEOFU.S. COMPLIANCEEFFORTS

ESTABLISHEDUS PERSONPOLICY

REMINDEDUS CLIENTSOFOBLIGATIONS

Credit Suisse took the proactive step of reminding USexpat clients about their foreign bank account reportingobligations under US Law. It is permissible under US law

for a US citizen to maintain a foreign bank account.

Under the Cross-Border +Project, Credit Suisse initiated a massivereview of the regulatory structures of the US and over 80 countries.This led to the redefinition of the already strict internal guidelinesapplicable to services for US residents.

INITIATEDREGULATORYREVIEWANDCROSS-BORDER+PROJECT

When the news of the UBS and LGT investigation broke,Credit Suisse moved promptly to prohibit transfers ofassets from depositors who had been terminated bythose banks.

PROHIBITEDUBSANDLGT TRANSFERS

Credit Suisse implemthan required by the (FATCA) with high du

IMPLEMENTE

Credit Suisse requested thacompliance, and submit cerreturn preparers.

REQUESTEDU

2002

Credit Suiss

approach toon the volunamendmenimplementalinked openavailable to

2008

REVIEWEDNON-US DOMICILIARYENTITIES

2011

2009

LEGACY ALLEGATIONS OF

OPENING US-LINKED

UNDECLARED ACCOUNTS

1953-2008

2008

RELATIONSHIPMANAGERSAREREQUIREDTOCERTIFYCOMPLETIO

Credit Suisse also began a voluntary e"ort to ensure itsaccounts were US tax compliant by systematicallyreviewing non-US domiciliary entities with US beneficialownership.

GLOBAL FINANCIAL CRISIS

2008Q1 2009Q2

ESTABLISHEDSWISS-BASEDU.S.

REGISTEREDBROKER-DEALER

ANDINVESTMENTADVISORCredit Suisse created a Swiss-basedlegal entity with broker-dealer andinvestment advisor registrations, CreditSuisse Private Advisors (CSPA), toservice US resident clients.

2002

The bank created a US Person Policy creating a strictframework governing its US cross-border business.Training was given by the legal t eam to all RMs inSwitzerland with US resident clients.

2006REVISEDCODEOFCONDUCT

Credit Suisse issues a revised Code of Conductmemorializing the banks commitment to complywith all relevant tax laws, a reminder of theBanks ongoing compliance e"orts.

2010

!

!"#$ "&' "(#)*+

The IRS program encourages US clients toself-report, Credit Suisse (i) in February 2012sent letters to over 1,600 former clientsinforming them of the program and (ii) sentsimilar reminders to US clients who had beenterminated.

EFFORTSTOFACILITATETHEVOLUNTARY

DISCLOSUREPROGRAM

2012

Credit Suisse announced its exit from the US resident cross-borderbusiness, and prohibited virtually all securities-holding relationships withUS residents, except through the banks US-licensed a!liates CSPAand PB USA, and a few pre-existing clients who documentedcompliance.

EXITEDUS RESIDENTCROSS-BORDERBUSINESS

AGREEMENTBETWEENUS & SWISSTO

REVISEDOUBLETAXTREATY

SEPTEMBER, 2009

offshore tax evasion - credit suisse (2!26!14)

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