UBS Group AG yesterday sweetwatered to pay $1.5 billion settlement. This payment comes in connection with a U.S. investigation of one of its newly acquired subsidiaries, Credit Suisse. On March 12, the U.S. Department of Justice (DoJ) announced a big one. The basic accusation was that Credit Suisse helped wealthy Americans hide more than $4 billion from the Internal Revenue Service (IRS). Our investigation started in early 2023. It showed that Credit Suisse had used at least 475 different offshore accounts to hide these assets in the first place.
The U.S. Senate Finance Committee stepped up the pressure on Credit Suisse. They verified their cuckoo-ness by admitting that the bank was facilitating the world’s billionaires hiding their money in the U.S. That two-year investigation into Credit Suisse started well before its shotgun wedding with UBS. As this Congressional probe detailed, integrating the two banks would be incredibly complicated and expensive.
Details of the Investigation
This week, the Department of Justice (DoJ) announced an alarming conclusion. Between 2014 and June 2023, Credit Suisse AG Singapore maintained undeclared accounts for U.S. clients, totaling more than $2 billion in assets. The report found that the financial institution knew or ought to have known that these accounts were U.S. connected.
The DoJ’s conclusions drew a disturbing picture of Credit Suisse’s practices. It stated, “Credit Suisse AG, which had ultra-high-net-worth and high-net-worth individual clients globally, conspired with employees, U.S. customers, and others to wilfully assist in concealing ownership and control of assets held at the bank.”
Our ongoing investigation revealed a pattern of abuse. This action was in direct violation of Credit Suisse’s previous settlements to avoid criminal prosecution over comparable misconduct. Senator Ron Wyden commented on the implications of these findings: “This settlement fully vindicates the findings of my investigation, which exposed how Credit Suisse continued hiding more than $700 million offshore for rich Americans, violating their deal to avoid prosecution.”
UBS’s Response and Future Plans
UBS is prepared to manage the financial effects of this settlement. At the same time, they’re focusing on bringing on Credit Suisse and merging them into their operation. CEO Sergio Ermotti emphasized that the integration remains on track, asserting, “We are confident in our ability to substantially complete the integration by the end of 2026, achieve our financial targets, and fulfill our growth initiatives.”
UBS expects to take a provision related to this settlement in its second quarter financial statements. This charge will be a reflection of the costs incurred by Credit Suisse’s reckless behavior in the run up to the merger. As the bank fulfills its mission, it needs to work in good faith with investigations that are still underway.
To that end, UBS has agreed to work extensively with prosecutors. The DoJ noted that Credit Suisse must “cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding U.S.-related accounts.”
Implications for Wealthy Clients
This inquiry is profoundly troubling. It raises fundamental questions of tax compliance for the rich and the obligations of banks and financial institutions to police the assets of their clients. Senator Wyden criticized the actions of Credit Suisse, stating, “The ultra-wealthy and shady Swiss bankers shouldn’t get a free pass to cook up offshore tax evasion schemes while regular Americans are paying their fair share.”
As UBS moves forward with its plans for integration and compliance, it faces a critical moment in reinforcing its commitment to ethical banking practices. The damage from this investigation should be the starting point for more regulatory oversight of all international banking activities.
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