U.S. banks to help regulators in tax evasion probe: WSJ

Tue Apr 29, 2014 8:26am EDT

The corporate logo of financial firm Morgan Stanley is pictured on a building in San Diego, California September 24, 2013. REUTERS/Mike Blake

The corporate logo of financial firm Morgan Stanley is pictured on a building in San Diego, California September 24, 2013.

Credit: Reuters/Mike Blake

(Reuters) - The Swiss units of Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) have agreed to hand over details to U.S. authorities about how they may have helped Americans to evade taxes, the Wall Street Journal reported.

Though the two banks will not face prosecution in the United States in return, they could be penalized by up to 50 percent of the value of the undeclared U.S. accounts they have handled, the Journal said, citing people familiar with the matter. (link.reuters.com/hyp88v)

The move comes as the U.S. Justice Department ramps up its investigations of Swiss banks that helped Americans dodge taxes leading to billions of dollars of missed revenues.

As part of the program with the authorities, named category 2, banks compile information about how they set up Swiss accounts for U.S. clients and also how much was contained in the accounts, the Journal said, adding that the information must be reviewed by an independent examiner.

The Justice Department is currently probing 14 Swiss banks over taxes after UBS AG (UBSN.VX) became the first major bank to settle over the charges. Two smaller Swiss banks have had to close shop as a result of the U.S. investigation.

Last month, a former Credit Suisse Group AG (CSGN.VX) banker pleaded guilty to conspiring to help U.S. customers evade taxes by using Swiss accounts, and said he did so with the encouragement of his superiors.

(Reporting by Avik Das in Bangalore; Editing by Saumyadeb Chakrabarty)

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Comments (1)
ahs1992 wrote:
Considering the level of scrutiny that U.S. citizens face as a result of having foreign bank accounts, Swiss bank accounts in particular, it almost seems illegal to have such an account. It will be interesting to see what effect this has on the willingness of Americans to maintain offshore accounts because it has become such a headache for the account holder. Conversely, it’s more than likely that the prospect of a U.S. investigation will have a negative impact on the willingness of these banks to deal with American customers. As a result, domestic Swiss banks and foreign-based banks in Switzerland will probably start passing over U.S. clients in the interest of avoiding inquiries from the U.S. Justice Department. Doubtless not all American account holders are concealing income that should have been taxed by law in the U.S. However, taking on the risk of sheltering American account holders who are evading taxes is obviously not worth it for the banks in question (whether or not they are branches of U.S. banks), as suggested by the highly cooperative behavior of Goldman Sachs and Morgan Stanley. It’s surprising that the cumbersome process of investigating American citizens with foreign bank accounts has not been phased out in favor of identifying and addressing factors that cause tax evasion in the first place. Instead of thoroughly examining each and every American account held at these banks, perhaps the emphasis should be placed on lowering our country’s excessive tax rates or simplifying the tax code, which could in turn encourage U.S. citizens to bring their money back home.

May 02, 2014 1:49pm EDT  --  Report as abuse
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