Credit Suisse became the first big bank in two decades to own up to criminal wrongdoing Monday, pleading guilty to U.S. charges that it willfully helped Americans evade taxes.
The Swiss financial giant agreed to pay $2.6 billion in fines related to sham entities it set up to disguise true ownership of accounts, destroying records, and enabling structured fund transfers to evade reporting requirements, U.S. prosecutors said.
The bank also facilitated withdrawals from the undeclared accounts by either providing hand-delivered cash to the United States or using Credit Suisse's correspondent bank accounts in the U.S., the Justice Department said.
The bank filed its plea Monday afternoon in the Eastern District of Virginia federal court, soon after charges were announced.
“This case shows that no financial institution, no matter its size or global reach, is above the law,” Attorney General Eric Holder said in the release.
“Credit Suisse conspired to help U.S. citizens hide assets in offshore accounts in order to evade paying taxes," the release said. "When a bank engages in misconduct this brazen, it should expect that the Justice Department will pursue criminal prosecution to the fullest extent possible, as has happened here.”
The $2.6 billion penalty includes $1.8 billion going to the Dept. of Justice on behalf of the U.S. Treasury, along with $100 million to the Federal Reserve and another $715 million to the New York State Dept. of Financial Services.
The bank had feared that a bigger financial settlement would threaten its credit rating, a source told Reuters.
The Justice Department has not frequently pursued criminal convictions of financial firms, especially global companies that could become destabilized following an indictment.
Lloyd Blankfein, who heads Goldman Sachs, has warned that guilty pleas from banks such as Credit Suisse would have an unpredictable effect on markets, the Financial Times reported last week.
But financial markets have so far been calm in the face of stiff penalties against Credit Suisse. There has been no indication that other banks have stopped doing business with the Swiss bank. It is still obtaining short-term funds in the repo and commercial paper markets, analysts said.
A repo is classified as a money-market instrument usually used to raise short-term capital, according to Investopedia, which explains commercial paper as an unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories and meeting short-term liabilities.
Credit Suisse’s chief executive Brady Dougan, who has come under pressure from Swiss politicians to resign, and Chairman Urs Rohner, would both stay in their jobs as part of the settlement, a person close to the bank told Reuters on Monday.
"There are no plans for a senior management shake-up or board changes," the source said, adding that contracts of some people lower in the bank would be terminated. The person did not give any individual’s name.
New York bank regulators expressed concern about management during the plea deal talks, and discussed replacing Dougan and others, a source familiar with the negotiations said. But in the end, the option was not made a condition of the deal.
A Credit Suisse spokesman declined to comment on the case to Reuters.
Al Jazeera and Reuters