Over many years I, and colleagues in the Tax Justice Network and elsewhere, said that offshore banking, and Swiss banking in particular, involved corruption. Now, as the Guardian reports:
Credit Suisse Group has pleaded guilty to criminal charges that it helped Americans evade taxes, becoming the first bank in more than a decade to admit to a crime in the US. It will now pay a long-expected fine of $2.5bn (£1.5bn).
You can, of course, expect 'rotten apple' theories to abound as a result: Credit Suisse will play the role of the one rotten bank. I do not believe that. A whole edifice and whole economies were, I believe, built on crime. We just now have the first major institution brought to account for it. Many should have been already; more should be in the future in my opinion.
And have no doubt that Credit Suisse did not make a minor mistake. As the US prosecutors have made clear it was institutionally corrupt. As they explained:
These secret offshore accounts were held in the names of sham entities and foundations. This conspiracy spanned decades. In the case of at least one wholly owned subsidiary, the practice of using sham entities to conceal funds began more than a century ago.
So, what are the consequences? First, I think all those who have long said that all that happens offshore is perfectly legal had better take a deep breath before making such a claim again. That is emphatically not true.
Second, surely question now has to be asked as to whether Credit Suisse is a 'fit and proper person' to hold a banking licence?
Third, the banking prosecution process has to move on. Credit Suisse was not alone.
Fourth, this did not happen without people knowing. They too have to be prosecuted, and that must start from the top.
Fifth, failure by the Swiss to tackle this corruption should lead to economic sanctions: they did, after all, permit their banks to declare economic warfare on the tax revenues of other countries.
Sixth, an acknowledgement that what tax campaigners have been saying all along is now overdue. I look to those offshore places that hosted Credit Suisse activities and supplied the sham entities and foundations to make it: I will not hold my breath though. I cannot see Jersey coming out with statements condemning the bank and its large St Helier hosted activity any time soon.
Finally, the US has a duty to follow the money. The evidence from this case will show who did supply the structures. who the counter-parties were and who, as clients, were engaged in this activity. They have a duty to pursue them too.
The world cannot afford this corruption. Now is the time to keep chasing it.
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I wonder how far the American authorities will follow the trail; as you say, there were counterparties and collaborators.
Some of them American, some of them rather influential in the corridors of Washington; some of them rather further in that mere lobbying.
The encouraging thing is that the case was pursued, and I should cheer them on rather than mutter whether they will follow up: we see proof today that large-scale larceny by financial institutions can be dealt with by a sufficiently courageous state.
It all begins with the political and institutional will to proceed. That will is lacking in London and it will be prosecutors in New York who bring our banks and accounting firms to account.
I was talking to a friend who’s a CS employee at the weekend. I doubt he’d disagree with much you’ve written. A small nuance — Swiss secrecy laws apparently require CS to operate in this way, he related. And in particular, if CS employees had agreed to share information with the US authorities, they would have been personally criminally liable with a prison term likely.
Hence sanctions being needed on Switzerland
I tend to agree. I also think, my friend’s job aside and other employees, it would send a very powerful message if the US revoked their trading license. I suppose given the world’s inteconnectivity, it would have all sorts if repercussions, many the US would dislike, so I think it’s unlikely to happen.
Mr Murphy –
The United States, and therefore the rest of the world, will not apply sanctions towards Switzerland.
The United States government has been very clear that they view these cases as legal matters that are to be resolved exclusively by the Justice Department and the Courts. Both the Senate Committee on Finance and the House Committee on Financial Services have generally reached the same conclusions. During the hearing of Credit Suisse’s senior management in the Senate Permanent Subcommitte on Investigations, Senators McCain and Levin focused on the tools available to the Department of Justice to apply pressure on the authorities of Switzerland and other non-cooperative jurisdictions.
At no point were sanctions of any type discussed or suggested by any branch of the United States government. The truth is that sanctions would require a vote by both the House and the Senate, and there exists no credible political scenario under which such a vote would be forthcoming. Sanctions against a friendly, freedom-loving nation like Switzerland are simply not in the national interest of the United States.
You were wrong on the savings Dax
I strongly suspect you will be again on everything else you predict if the situation demanded it
Oh, the friend also related that other banks are know to be engaging in significantly more brazen activity.
We know that’s true
Some have already paid billions in fines
As someone said on the Today prog’this am, it will be seen by the bank as a necessary ‘cost of doing business’. They will have stopped doing this particular stunt and have moved on to something new. Shares are sitting right in the middle of their 52 week range, so the banks owners [shareholders] are unfazed. As to whether this is the start of a different approach to corporate crime in the US the answer is surely no. After all, they have been committing serious criminal offences, at a senior level [some 1,800 Credit Suisse employees] in the bank for ‘decades’ for which any individual might expect a custodial sentence. No one is to be prosecuted.
The licence of the bank to trade in the US is not revoked, of course. Same old.
Unfortunately, all true
Too true Paulc, too true. Especially in light of the comment below.
“These secret offshore accounts were held in the names of sham entities and foundations. This conspiracy spanned decades. In the case of at least one wholly owned subsidiary, the practice of using sham entities to conceal funds began more than a century ago.”
Think about it, we’re prosecuting well known men for (possible) sexual assaults committed years ago, the ICC in the Hague seeks to prosecute alledged war criminals for crimes committed years ago (rightly), but tax evasion going back decades only incurs fines; no prosecution of individual bankers, or their clients. Credit Suisse is essentially an institutionally criminal organisation, and the only possible thing left to do is destroy it as an organisation by revoking its banking licence.
But of course, rthat isn’t happening. One law for the rich, another for everybody else. Absolutely sickening.
Part of the problem is that the US governemnt is not perceived as a true ‘victim. In sexual assaluts tehre is a clearly identifiable victim – in war crimes there are identifiable victims. But in teh CS case the victims is simply the US government.
We (though perhaps not all on this blog) tend to forget that the governemmnt being short changed (stolen from!) does have implications for individuals – underinvestment in benefits systems, hospiotals etc etc. – so there are indirectly indivduals who suffer as a result of CS’s actions. Their crime is not victimless – it’s just not as easy to identify them.
ps – Sorry about the bad typing 🙂