White-collar crime covers a lot of legal territory; from security fraud, wire-fraud, money laundering to tax evasion. In this situation the second largest bank in Switzerland, Credit Suisse, has been indicated (charged) and has been adjudicated guilty of a felony. Historically, the United States and the New York State’s Attorney General, have balked at indicting banks. The Securities and Exchange Commission, the Justice Department, and State and Federal banking regulators can either elect civil process or criminal process to rein-in bankers. When the criminal process results in a conviction it can be a death sentence for a banking institution.
What’s important about this headline is that a felony charge was used instead of a gentleman’s agreement pursued under the alternative civil regulatory process. A felony conviction for any bank raises the very real risk of having to close their business. To avoid that very real possibility, Credit Suisse agreed to what are historically important concessions. In return the United States banking authorities have waived, or declined to use, their power to suspend Credit Suisse from conducting investment and banking business within the United States. Swiss banking laws do not permit any bank to reveal the identity of its depositors. Several years ago, U.S. Federal criminal authorities pursuing tax avoidance charges against U.S. citizens, demanded and received assurances from Swiss government officials that the names of U.S. citizens would be revealed. The Swiss never completed the understanding. Banking regulators in New York and the Justice Department and the office of United States Attorney General, in Washington D.C have imposed, and will share, a $2.6 billion fine imposed on Credit Suisse. The big Swiss Bank and its parent company, have pled guilty to one count of conspiracy to aid in tax invasion, a felony.
What is important is that this large bank is now a convicted felon. What is going on here? Federal prosecutors as well as the Federal Reserve and New York State banking regulators are going after top tier tax evasion programs conducted through and by banks in Switzerland. Now, banks in Switzerland have agreed to reveal their offshore banking operations. The agreement does not require the Swiss bank to reveal the false names used in creating trusts holding taxable deposits from US citizens. They will, however (and this is a major thing) have to keep those records within the United States. We expect that indictments and subpoenas will be issued in New York to open those files, reveal names, and begin prosecutions in state and federal courts. What comes next is a long anticipated series of indictments coming out of federal courts in New York and Florida. Within six months Credit Suisse will turn over to their United States operations, the true identities of depositors using offshore Swiss bank offices. Next will come government attempts to get to those lists and begin prosecutions for tax evasion.
Many criminal lawyers, including me, anticipate a great many new indictments filed under the Patriot Act as well as violations of the United States tax code.