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Justice pressured to get more US taxpayer info from Credit Suisse

sCredit Suisse Group AG is among 14 Swiss banks the Department of Justice is investigating for allegedly helping U.S. taxpayers evade taxes on assets held in foreign accounts. As you may know, the U.S. government has been aggressively pressuring foreign governments to force banks headquartered in their countries to reveal the account information of their American account holders.

Much of this is the result of the 2010 Foreign Account Tax Compliance Act, a crackdown initiative against tax evasion by concealing assets in so-called “tax-haven” countries.

The Credit Suisse investigation involves alleged activities that took place before the FATCA was passed, but the issue far as Credit Suisse’s U.S. clients is largely the same: their identities and account information could be handed over to prosecutors.

Credit Suisse is suspected of helping American taxpayers hide some $10 billion in taxable assets from the IRS before 2008. The bank’s CEO, stressing his belief that only a small number of Swiss bankers were involved in any wrongdoing, admitted that some of them helped American clients set up shell entities in order to hide the true ownership of their foreign assets. Top bank managers, he said, were unaware.

Credit Suisse has given Justice the names of 238 American account holders who may have been involved in the scheme. Why so few? Under Swiss law, it’s a criminal offense to release the name of an account holder, except under a treaty and only if the account holder is accused of tax fraud — not evasion. A treaty amendment to change that is currently blocked in the Senate.

This week, however, members of the Senate Permanent Subcommittee on Investigations were highly critical of Justice’s failure to get more names. Observers believe Credit Suisse will be criminally charged, and that it will ultimately resolve the charges through a fine in excess of $1 billion. Whether any more names of U.S. account holders will be turned over remains unclear.

If you have an interest in or control over a foreign account and haven’t yet complied with FATCA, there is no more time to wait. The IRS has a voluntary disclosure program that could limit the otherwise-colossal penalties for past noncompliance. You can only take advantage of the IRS program, however, if you file before the IRS finds your account. Now is the time to talk to an attorney experienced in all the legal issues surrounding offshore assets.

Source: Accounting Today, “Credit Suisse’s U.S. Clients in Limbo amid Tax Prosecutions,” David Voreacos, Bloomberg, March 7, 2014