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  • Major Global Bank Pleads Guilty to Criminal Charges For The First Time in a Decade

    On May 19, 2014, Credit Suisse admitted to conspiring to aid tax evasion and became the first large global bank in a decade to plead guilty to a crime in the United States.

    “In the course of a painstaking, years-long investigation, the Department of Justice discovered that Credit Suisse and its subsidiaries engaged in an extensive and wide-ranging conspiracy to help U.S. taxpayers evade taxes” said Attorney General Eric Holder. The Swiss Bank “knowingly and willfully” helped thousands of Americans open accounts and conceal their “assets and income from the IRS” through the use of offshore havens. As part of a fraudulent scheme that spanned for decades,Credit Suisse utilized sham entities to disguise undeclared accounts and destroyed financial records that were sent to U.S. clients.Now, pursuant to the plea agreement, Credit Suisse must pay $2.6 billion in penalties and fines to U.S. authorities.

    The prosecution of Credit Suisse is a clear example of the Justice Department’s changing attitude and recent push to hold major corporations accountable for illegal activity and financial misconduct. For at least the past ten years, prosecutors were reluctant to indict major corporations out of fear that doing so would annihilate the financial market and severely damage the economic health of the nation at-large. In fact, the last global bank to plead guilty to a crime in the U.S. was Credit Lyonnais SA, which admitted in 2004 that it made false statements to the Federal Reserve.

    The Credit Suisse case “shows that no financial institution, no matter its size or global reach, is above the law,” said Attorney General Holder. “We will never hesitate to criminally sanction any company or individual that breaks the law. A company’s profitability or market share can never and will never be used as a shield from prosecution or penalty.”

    The disgraceful facts of this case, however, may not be the only reason the Justice Department decided to pursue a criminal conviction. In a post-plea statement, Attorney General Holder explicitly recognized that “Credit Suisse not only knew about this illegal, cross-border banking activity; they willfully aided and abetted it.” When it became clear in 2010 that the Bank was being investigated, Credit Suisse “failed to retain key documents, allowed evidence to be lost or destroyed, and conducted an inadequate internal inquiry” said Attorney General Holder. “The bank subverted disclosure requirements, destroyed bank records, and concealed transactions involving undeclared accounts by limiting withdrawal amounts and using offshore credit and debit cards to repatriate funds. They failed to take even the most basic steps to ensure compliance with tax laws,” said Attorney General Holder.

    The prosecution of Credit Suisse represents a significant maneuver by the government to hold a major global entity criminally liable for not employing effective compliance mechanisms. In light of this exceptional example of criminal liability, all corporate entities need to strengthen internal compliance models and revise internal policies. Principals, corporate executives, and lower level employees must know how to prevent, investigate and resolve dishonest or illegal financial activity in order to limit potential liability. As soon as an entity has notice of any alleged misconduct, it also must trigger an effective document retention program, that should already be in place, in order to comply with federal and state law.

    If your institution has questions or concerns about this topic and you would like further information, please email Jim Ryan at jryan@cullenanddykman.com or call him at (516) 357-3750. This article was written with Hayley Dryer, an associate at the firm.