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SENATE REPORT ON OFFSHORE TAX EVASION RELEASED

On February 26, 2014, the United States Senate Permanent Subcommittee on Investigations released a report regarding offshore tax evasion and specifically the actions of Credit Suisse, Switzerland’s second largest bank.  The report is the product of a two-year investigation initiated in 2011 after seven Credit Suisse bankers were indicted by the U.S. Department of Justice (DOJ) for aiding and abetting U.S. tax evasion.

The report is highly critical of Credit Suisse, accusing the bank of actively helping thousands of Americans conceal their wealth offshore.  More specifically, it is alleged Credit Suisse opened undeclared Swiss bank accounts for individuals, opened accounts in the name of offshore shell entities to conceal U.S. ownership, sent Swiss bankers to the United States to recruit new U.S. customers and serviced existing Swiss accounts without creating a paper trail.  Finally, the report faults Credit Suisse’s efforts following the UBS scandal to close Swiss accounts held by U.S. citizens as too slow and ineffective.  However, at the end of 2013, Credit Suisse indicated it had accounts for about 3,500 U.S. customers, representing an 85% drop. 

The report is critical of the DOJ as well, citing its failure to prosecute the dozen or so Swiss banks that facilitated U.S. tax evasion and the thousands of U.S. citizens whose names and hidden accounts were disclosed.  Further, in its efforts to obtain the names of account holders, the DOJ relied solely on the restrictive U.S.-Swiss tax treaty, rather than using available remedies enforceable through the U.S. court system, and this, too, was the subject of criticism in the report. 

The report concludes by making several recommendations to combat offshore tax evasion.  First, the DOJ should use available U.S. legal means, such as grand jury subpoenas and John Doe summons, to obtain the names of U.S. taxpayers with undisclosed accounts.  In addition, the U.S. Treasury should close loopholes in the FATCA regulations, such as provisions that allow financial institutions to ignore account information stored on paper and allowing foreign financial institutions to treat offshore shell entities as non-U.S. entities.  Finally, the report recommends that the U.S. Senate promptly ratify the 2009 Protocol to the U.S. Switzerland tax-treaty, which includes improved disclosure standards.          

 -Barry S. Engel

 

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Barry S. Engel
Email: info@engelreiman.com